Zomato Pulls Out Of 225 Cities Citing “Not Very Encouraging” Performance

Food delivery major Zomato said it pulled out of around 225 smaller cities in India last month due to poor performance over the past few quarters.

In the company’s letter to the shareholders, Zomato CFO Akshant Goyal said, “Recently, in January, we have exited around 225 smaller cities which contributed 0.3% of our GOV (gross order value) in Q3FY23 (October-December).”

Zomato was operational in more than 1,000 cities, according to its annual report for FY22. Therefore, the listed food delivery giant has decreased its geographical presence by around 23% in the country.

Goyal added, “Performance of these (225) cities was not very encouraging in the past few quarters and we did not feel the payback period on our investments in these cities was acceptable.”

Even so, this would have hardly impacted the company’s costs in any way, according to the CFO. During the post-earnings analysts call, Goyal said pulling out of these cities would not have a very material impact on Zomato’s operational costs.

Last week, the Gurugram-based company reported its financial results for the quarter ended December 31, 2022. 

Zomato’s consolidated revenue grew 1.75X to INR 1,948 Cr in the quarter, while its loss skyrocketed 5X to INR 346.6 Cr. This includes the revenue figures for its quick commerce business Blinkit and the B2B vertical Hyperpure.

On a yearly basis, Zomato’s adjusted food delivery revenue saw a rise of around 1.3X for Q3FY23, but the same declined on a sequential basis. Interestingly, the listed foodtech defines adjusted revenue for the food business as the revenue from operations as per the financials plus customer delivery charges.

In terms of numbers, that translates to Zomato’s adjusted revenue for food delivery reaching INR 1,565 Cr in Q3FY23, compared to INR 1,581 Cr in the previous quarter, and INR 1,200 Cr during the year-ago quarter.

Zomato attributed the loss in revenue to an ‘industry-wide slowdown’ in the food delivery industry since late October. Zomato added that while the bearish trend was visible across the country, it was the most impactful in the top eight cities.

At the same time, the company’s gross order value for the food delivery business, which includes taxes, customer delivery charges, gross discounts and excludes tips, clocked in at INR 6,680 Cr for Q3FY23, a growth of 0.7% sequentially.

Shares of Zomato opened at INR 53 apiece on Monday (February 13), slightly lower than the last close of INR 53.30 on Friday (February 10).

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