Indian food delivery giant Zomato has exited 225 small cities over bleeding revenues. The company’s loss has exceeded Rs 346 crores in the last quarter (Q3) that ended in December 2022. In a letter to shareholders Zomato’s CFO Akshant Goyal remarked that the performance of the company in 225 cities was not very encouraging. The company’s loss surged 5x while its consolidated revenue increased by 1.75x to Rs 1,948 crore in Q3FY23 (October to December). This also includes the revenue of quick commerce venture Blinkit and its B2B vertical Hyperpure.
Earlier, Zomato was operational in over 1,000 cities per its annual report for FY22. With the current exit, the company’s geographical presence in the country has decreased by 23%. CFO Akhsant Goyal writes that the payback period in the 225 cities was not acceptable on the investment Zomato did. However, Goyal believes this has hardly any impact on the company’s costs anyways. There’s no material impact on the operational costs of Zomato owing to pulling out of these 225 smaller cities, the CFO noted even during the post earning analysts call.
Shares had a minimal impact on valuation so far. However, recuperating the loss is a big concern, not only for Zomato but for its competitors in the biz who are going through the same phase. Zomato meanwhile attributed the losses to an ‘industry-wide slowdown’ since October 2022. The company states that the bearish trend was visible across the country and had adverse impact in the top eight cities.