Now, Zomato To Liquidate Its Vietnamese And Polish Subsidies

After dissolving its multiple global subsidiaries in 2023, the restructuring effort continues for food tech giant Zomato even in 2024. 

In an exchange filing on Thursday (January 4), the company said that Zomato Vietnam Company Limited (ZVCL), a step-down subsidiary of Zomato Limited, situated in Vietnam has initiated the process of liquidation. 

Zomato noted in the filing that ZVCL’s contribution to the company’s total turnover was zero.

“ZVCL is not a material subsidiary of the company, and the dissolution of ZVCL will not affect the turnover/revenue of the company,” Zomato said. ZVCL’s net worth was INR 36 Lakh.

The announcement came a day after the listed food tech startup said that the liquidation process of its Polish step-down subsidiary, Gastronauci SP. Z.O.O., was initiated. This subsidiary’s contribution to the company’s total turnover was also zero.

Shares of Zomato continue to sustain an uptrend. The Zomato stock ended the day’s trade almost 2% up at INR 129.95 on the BSE.

Amid its growing focus on achieving profitability, Zomato streamlined multiple aspects of its business last year, which included stopping its business in multiple countries, including Indonesia, Jordan, Czech Republic, and Slovakia. 

Zomato achieved profitability in 2023 in Q1 FY24 and continued to report increasing profit in the next quarter – Q2.

On the other hand, Zomato now continues to bolster its monetisation strategies and has hiked its newly introduced platform fee to INR 4 per order from INR 2-INR 3 initially.

However, the company is now embroiled in fresh tax trouble. Tax authorities have slapped a notice of INR 4.2 Cr on the startup for alleged short payment of goods and services tax (GST). 

Last month, Zomato received an INR 401.7 Cr show cause notice from the Directorate General of GST Intelligence, Pune Zonal Unit, over unpaid tax on delivery charges collected from the customers.

Following the new trouble mounting for the company, JM Financial said in a recent research report that assuming the final order passed goes against Zomato, the platform would pass the GST burden directly to the end customers. 

Besides, Zomato has a cash balance of INR 11,800 Cr, which is enough to cover the impact of any adverse orders towards historical dues, the brokerage observed.

“However, the key thing to watch out will be how long the case drags and the remedial measures that the company takes to mitigate any future tax liability demand,” it added. 

Last year, Zomato shares had gained over 100% and many analysts now see it as a “multi-bagger stock”.