Zomato Private Limited, an online food delivery platform, has reported an uptick in its advertising and sales promotion expenditure, reaching Rs 1326.6 crore for the fiscal year ending on March 31, 2020, compared to Rs 1218.27 crore in the preceding fiscal year, as per financial data obtained from the business intelligence platform Tofler.
In its regulatory filing, Zomato clarified that any amount exceeding the revenue earned from transacting users is categorized as advertising and sales promotion expenses. Incentives offered to transacting users are treated as customer payments, leading to a reduction of revenue on a transaction-by-transaction basis.
Similarly, when incentives are provided to transacting users not responsible for delivery, they are not considered customers of the company, and such incentives are recorded as advertising and sales promotion expenses.
Zomato declined to comment on its financial results for the fiscal year 2019-2020.
On a standalone basis, Zomato incurred a net loss of Rs. 2451.1 crore, a significant increase from the Rs. 940.4 crore loss in the previous fiscal year. Total income more than doubled to Rs. 2485.7 crore from Rs. 1255 crore, demonstrating a growth of around 100% over the prior year. Total expenses for the year rose to Rs. 4627.7 crore from Rs. 3383.5 crore.
Consolidated figures revealed a net loss of Rs. 2385.6 crore compared to Rs. 1001.1 crore in the previous fiscal year. Total income also more than doubled to Rs. 2742.7 crore from Rs. 1397 crore, with total expenses increasing to Rs. 5006.3 crore from Rs. 3598 crore.
Zomato’s primary revenue streams are Ad Sales, Online Ordering, and the Zomato Gold business segments.
In its regulatory filing, Zomato highlighted continued growth in ad sales, online ordering, and Gold subscriptions. Improved unit economics in online ordering were attributed to increased revenue, reduced logistics costs, and user discounts.
Zomato explained that advertising revenue mainly comes from the sale of online advertisements, recognized over the contracted period as the company meets its performance obligations. Some contracts include assurances of a certain number of “clicks,” with revenue recognized when both time period and click conditions are met.
Post-October 28, 2019, Zomato operates as a platform provider for delivery partners, charging a platform fee for the service. The company emphasized its focus on efficiency and cost reduction, significantly lowering the overall burn rate.
The acquisition of Uber Eats during the reviewed year strengthened Zomato’s position as a market leader in the delivery business. The B2B supplies business in its wholly-owned subsidiary, Zomato Internet Private Limited (Hyperpure), experienced substantial growth.
Zomato acknowledged the impact of the Covid-19 pandemic, resulting in a significant drop in order volumes and a substantial reduction in dine-out revenue. Efforts to address these challenges include the introduction of contactless dining and delivery/takeaway products in select geographies outside of India.
The company mentioned that the Covid-19 pandemic has also affected its food@work business (cafeteria meals business) under Tonguestun Food Network Private Limited, with a reduction in business due to the widespread adoption of remote work. Decisions regarding the continuation of the delivery business in specific cities were made after analyzing market potential and profitability.
