Food delivery company Zomato is planning to invest $1 billion (Rs 7,448 crore approximately) in startups in the quick-commerce space over the next two years, founder Deepinder Goyal said on Wednesday.
Zomato reported widening of its consolidated net loss to Rs 434.9 crore for the quarter ended September 30, 2021, mainly on account of investments in the growth of its food delivery business. The company had posted a net loss of Rs 229.8 crore for the corresponding period of the previous fiscal.
"We plan to deploy another $1 billion over the next 1-2 years, with a large chunk of it likely to go into the quick-commerce space... We are likely to invest more in this space in the near term," Goyal said on Zomato's blog.
In addition, Zomato also confirmed a $75-million deal with Bigfoot Retail Solutions Pvt Ltd for an 8 per cent stake. Bigfoot runs logistics and delivery business 'Shiprocket'.
Zomato said it is eyeing more companies for investments to build an "ecosystem of companies around food delivery" that will eventually bring down "the cost of running a better food delivery business goes". The food delivery platform is planning to invest $50 million in Samast Technologies Pvt Ltd, which operates Magicpin.
Apart from that, the platform also plans invest $50 million for a cumulative 6.4 per cent stake worth $100 million in Curefit.
The company has also shut many of its non-core businesses to focus on its food delivery business. These non-core businesses contributed less than 1 per cent to Zomato's Adjusted Revenue and 13 per cent to the Adjusted EBITDA loss in Q2 FY22, the company CEO said.
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"We believe that the food delivery market in India is still nascent, and there is an opportunity to grow the market at least 10x over the next few years... We are currently in talks with various restaurant point-of-sale (POS) players, e-vehicle fleet operators, among others, to evaluate investments in these companies keeping the long term in mind," Goyal.
The company said its losses went up specifically due to three reasons -- increased spending on branding and marketing for customer acquisition, increased investments and growing share of smaller/emerging geographies in the company's business and increased delivery costs due to unpredictable weather and increase in fuel prices, they added.
Zomato's delivery cost per order increased by Rs 5 per order in Q2 FY22 compared to Q1 FY22 on account of unpredictable rains and sharp increase in fuel prices. However, Goyal said that the company doesn't estimate its delivery costs to go up further and is feel confident about its contribution margin staying positive in the mid, as well as long term.
Zomato made a stellar stock market debut in July this year for Rs 9,375 crore with its shares trading at a premium of 53 per cent.
($1= Rs 74.48)
(With agency inputs)
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