Zomato Reduces Loss Amidst Investor Gloom Around Food Delivery

Indian food delivery firm Zomato, which is backed by China’s Ant Group, said it had reduced its quarterly loss amidst an increase in orders on its platform, as the food-delivery business comes under investor scrutiny following a surge during the earlier stages of the Covid-19 pandemic.

Uber Eats, which kept parent company Uber Technologies afloat during the worst period of the pandemic, is expected to show strain when the company announces its results later on Tuesday, while the UK’s Deliveroo last month cut its annual revenue forecast amidst a worsening cost of living crisis and rampaging inflation.

But Zomato said in a regulatory filing it had reduced its net loss to 1.86 billion rupees ($23.52m, £19.2m) for the quarter ended 30 June from a loss of 3.56bn rupees a year earlier.

Steady expansion

Revenue from operations, which is mostly derived from food delivery and related fees charged to restaurants, rose to 14.14bn rupees from 8.44bn rupees year-on-year.

The Gurugram-based company said gross order value for the quarter rose 41.6 percent year-on-year to 64.3bn rupees, with 16.7 million average monthly active customers.

Chief executive Deepinder Goyal said margins were impacted by higher fuel costs and wage inflation, but rising monthly active customers were likely to drive volume growth.

Ride-hailing resurgence

But Bernstein analyst Nikhil Devnani said food delivery services in Europe and the US were likely to suffer from the impact of inflation “as consumers tighten up their wallets”, citing Deliveroo’s warning.

Uber has seen a rebound in its core ride-hailing business, but this could also be affected by a possible driver shortage spurred by surging gasoline prices, according to MKM Partners analyst Rohit Kulkarni.

Lyft said last quarter it was forced to offer drivers incentives to ensure a steady supply of rides, but Uber said at the time it was not seeing the need to offer such incentives.

Investor uncertainty

Lyft is scheduled to report its own earnings on Thursday.

Analysts expect Uber to post second-quarter revenue of $7.39bn, up 88.2 percent year-on-year, according to Refinitiv, while Lyft’s revenue is expected to rise 29.1 percent to $987.9m.

In spite of the rebound the value of Uber’s shares has declined 44 percent so far this year, with Lyft dropping 68 percent amidst a broader decline in tech stocks.