Zomato’s net loss still evident despite revenue surge

Haryana -Zomato has been trying to sustain a profit margin during the ongoing Covid-19 pandemic and despite the discounts it offers, it has been able to stay behind the red line saving itself from extreme losses. However, the food delivery giant’s net losses have widened in recent months taking it to Rs 435 crore.

Experts are wondering the reasons for this as Zomato’s revenue saw a surge in the second quarter but the decline in the net profit offers a different story. Last year this loss was Rs 230 crore and the double jump within a year is what is concerning the Zomato officials.

It is evident that loss is majorly due to the investments made towards the promotion and growth of the food delivery application. Other than that Zomato has also invested in acquisition including some of the startups, for example, Curefit, Magicpin and Sprocket.

As per Zomato’s statement on the matter, the sudden increase in losses was due to increased spending on branding and marketing for aspects related to consumer relations. It also accounts to the investment and acquisition in the smaller regions at present.

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It is well known that deal prices have gone drastically up and that also contributes to changing structure in the food delivery business. Weather changes are also another factor behind this as it directly impacts the delivery charges. Zomato has increased delivery charge by Rs 5 per order during the September quarter citing the rainy season.

Initially, experts were worried about Zomato’s stargeis saying that such large scale investment may prove threatening for Zomato but after its successful initial public offering starting this year, the company has stayed well in focus to boost its revenue position over the coming years through investments battles.

“Some of these investments would eventually result in merger and remaining would generate financial returns or learnings for Zomato,” stated Zomato. In the coming one or two years, Zomato also plans on deploying additional $1 billion so that investments in other businesses can be done. Other than that, the company will also be going ahead with shutting down all its non-core businesses after it found out that Zomato will not be getting any benefits in the long term with these secondary businesses.