Breakeven levels to largely be achieved on account of food delivery EBITDA and bringing fixed costs down: Zomato
Earlier, Zomato had said that its food delivery business achieved breakeven at adjusted EBITDA level during the June quarter of 2022
Zomato also reduced the overall investment guidance for Blinkit to $320 Mn from $400 Mn announced earlier
Foodtech giant Zomato has said that it will achieve overall business adjusted EBITDA breakeven between the fourth quarter of the current fiscal and the second quarter of the financial year 2023-24 (FY24).
“In terms of timeline, internally, we are aiming to get there by Quarter 4 of this fiscal year. That is the internal goal that we have as a team but we think that if we slip on that, it should not be later than Q2 FY24, which is September 2023 quarter for getting to breakeven on adjusted EBITDA at the Zomato level,” Zomato CFO Akshant Goyal said during the startup’s earnings call.
Zomato’s food delivery business achieved breakeven at adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) level during the June quarter of 2022.
The earnings call took place on August 2, and its transcript was released on Wednesday (August 10).
On the major drivers of Zomato’s breakeven strategy, Akshant said that it would primarily be led by food delivery EBITDA. He further added that the foodtech major is working on bringing fixed costs down and is also looking ‘critically’ at all other allied costs.
“…the majority of the reduction in adjusted EBITDA for Zomato as a company will come from incremental EBITDA from food delivery going forward and also Hyperpure losses coming down,” added Goyal.
Hyperpure is Zomato’s supply platform for restaurants.
Akshant also said that Zomato is already positive on cash flow, as the Gurugram-based company had an adjusted EBITDA loss of INR 150 Cr compared to an other income of INR 170 Cr in the first quarter of the current fiscal.
“So, in some ways, we are not losing cash in that business anymore…So, now, I think the next milestone is to get the overall Zomato business to adjusted EBITDA breakeven and we think we are close now,” he said.
The CFO also said that Zomato has reduced its overall investment guidance for quick-commerce startup Blinkit to $320 Mn from $400 Mn earlier.
“Given where the business is today and the path forward that we see, we think we should get that business also to break even with an investment of $320 million starting January 2022,” added Akshant.
Of this, Zomato has already invested $150 Mn in Blinkit.
In response to a query, he also said that losses at Blinkit are also coming down and it should continue to reduce post the transaction as synergies kick in.
On questions about customer acquisition costs (CAC), he said that the startup’s CAC is at a ‘healthy’ level and is coming down ‘slightly’.
On the widely reported plan to move to multiple CEO-regime, Akshant said that the company is looking at re-organising itself as it moves away from a food delivery-only business.
“I don’t think there’s anything to worry about. I mean, it is internal restructuring just to get the teams and incentives and organisation structure aligned for the next three-four years going forward as a business,” he added.
On Wednesday, Zomato also said that it has completed the acquisition of the Albinder Dhindsa-led Blinkit. The $568-Mn Blinkit acquisition deal was announced on June 24, while the proposal received shareholders’ nod last month.
Zomato’s consolidated net loss nearly halved to INR 186 Cr in June quarter of 2022 from INR 360 Cr in the corresponding quarter of previous year.
The shares of the foodtech company closed 0.9% higher at INR 55.95 on the BSE on Wednesday.
