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LOSSES

One of India’s best-known startups is being scrutinized like never before

Melting-Icecream
Reuters/Enrique Marcarian
Meltdown.
  • Itika Sharma Punit
By Itika Sharma Punit

Co-editor, Quartz India

This article is more than 2 years old.

Zomato has probably never had to battle these many negative headlines in its eight years of existence.

From devaluation to layoffs, the online restaurant discovery portal seems to have lurched from one PR disaster to another over the last few months.

On May 25, Zomato again made news for the wrong reasons when its annual earnings were reported. Losses at the Gurugram-based company widened four times in fiscal 2016, further underscoring the tenuous condition of India’s food technology startups.

Zomato had a pre-tax loss of Rs492.3 crore during fiscal 2016, 262% higher than the Rs136 crore in the previous year, according to a regulatory filing (pdf) by Info Edge, which owns around 50% stake in Zomato. Losses widened despite revenue doubling during the year to Rs185 crore from Rs97 crore.

Zomato did not respond to an email seeking details about the company’s performance. It had launched a new food ordering business this financial year and made an acquisition in the US.

On the positive side, Zomato’s burn rate—cash that a company spends each month to continue operations—has declined to one-third of what it was a year ago, Hitesh Oberoi, MD & CEO of Info Edge, told CNBC-TV18.

Bad news after another

After a massive funding spree in 2015, food technology startups in India have been struggling over the last few months. The sector has seen several instances of layoffs, slowdowns, and even shutdowns.

May 2016 has been a bad month in the press for Zomato. Earlier this month, it was reported that HSBC devalued the company to $500 million—almost half of its Sept. 2015 value.

In October 2015, Zomato laid off roughly 10%—numbering around 300—of its workforce, to focus on more profitable areas. A month later, it made headlines when an angry email from founder and CEO Deepinder Goyal was leaked to journalists. In the email, Goyal had reprimanded Zomato’s sales staff over missing sales targets.

Throughout 2015, Zomato also struggled with its food-ordering business.

Zomato entered the food ordering space in April 2015. A month later, it launched Zomato Order, a separate app for this business. However, in January 2016, Zomato said it was discontinuing food ordering operations in slow markets like Lucknow, Indore, Kochi, and Coimbatore.

However, there is a silver lining.

In February, Zomato announced an operational break-even in six markets—India, the UAE, Lebanon, Qatar, The Philippines, and Indonesia. The company, operating in 23 countries, did not share details on what percentage of its business comes from these six markets.

As experts struggled to make sense of this incomplete information, this was the closest Zomato came to making good news in the 2016 financial year.

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