India is at an inflection point for internet businesses. Between the years 2012 and 2020, India saw 25 private companies which were valued at more than $1 billion (popularly known as unicorns). This calendar year so far, we have seen 35 new unicorns in India. While there is a lot of chatter about this being a ‘bubble’, a closer look at most of these companies will tell you that real revenue, real growth, and a real revolution in India is underway. We believe the next 10 years in the Indian internet ecosystem will be unprecedented and will create a tremendous amount of wealth and progress for our country. 

This has fuelled our ambitions further and we are now thinking about how we can create a $10 billion business by revenue in a few years time. The paradigm for India has changed within a year and that gives us a new opportunity to build a much bigger Zomato than what we dreamt of a year ago.

Before we delve into our performance for the last quarter, we want to share our updated thinking for the long term success and compounding growth of our business.

The long term view of our business

In this section, we will cover the three main parts of our long term strategy

  1. Brutal prioritisation – divest or shut down any businesses which aren’t likely to drive exponential value for our shareholders in the long term
  2. Invest in our core food businesses and the ecosystem around it to make it a robust long term value driver
  3. Build the hyperlocal e-commerce ecosystem by leveraging our key strengths to invest and partner with other companies to tap into growth opportunities beyond food

Brutal prioritisation – divesting or shutting down non-core businesses

Our core food related businesses – a) food ordering and delivery, b) dining-out, and c) hyperpure (B2B supplies for restaurants) will remain the key value drivers for Zomato for the next few years. These are all complex businesses and we want our entire team to stay focused on these most important value drivers for our business. 

Keeping this in mind, we are in the process of divesting or shutting down our non-core businesses which were not going to significantly move the needle for our shareholders in the long term. All of these businesses, that we are divesting or shutting down, contributed less than 1% to our Adjusted Revenue and 13% to our Adjusted EBITDA loss in Q2 FY22.

The divestment vs shutdown debate starts and ends with two questions – a) Can we sell the business to someone for whom it is core, and can they realise disproportionate returns from what we have built? b) Is the divestment process worth the value that we will realise from the divestment? Fitso checked these boxes on divestment and we are in the process of selling Fitso to Curefit (Curefit Healthcare Pvt Ltd) for $50 million. In order to cultivate a great long term partnership with Curefit, we are also investing cash in Curefit. Net $50 million cash investment plus value of the Fitso business (worth $50 million) will give us a cumulative shareholding worth $100 million in Curefit (6.4% shareholding in Curefit). This will help us potentially explore cross-selling benefits between Zomato and Curefit, as we see food and health becoming the same side of the coin in the long term.

We have shut down our direct-to-consumer (“D2C”) experiment in Nutraceuticals. Instead, we are choosing to back a platform play for all D2C brands (by investing in Shiprocket; more on this later). We are also shutting down our operations in Lebanon, which is the only international business we were left with (other than dining-out business in UAE) after shutting down the rest of our international operations last year. 

Invest in our core food businesses and the ecosystem around it

Our mainstay food ordering and delivery business is an opportunity where we expect huge shareholder value creation going forward. 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. In order to make this happen, we are going to continue investing heavily in market creation, in addition to investing in ecosystem companies around our food delivery business so that the cost of running a better food delivery business goes down with time. 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.

Dining-out is still recovering from the shockwaves of COVID-19, and it will take a few months for the dining-out sector to get back on the growth path it was on pre-COVID. We continue investing in product development and working with our restaurant partners to get the industry back in shape easier and faster.

Hyperpure is growing well, and we are excited about what it can become. We are building this business with first principles discipline, and are planning to invest upwards of $50 million in this business over the next 18-24 months. We will dive deeper into the growth and shape of our Hyperpure business in one of the shareholder letters in the next couple of quarters. 

Build the hyperlocal e-commerce ecosystem by investing and partnering with other companies to tap into growth beyond food 

Our business today is at the confluence of food and hyperlocal e-commerce. What powers our business is the last mile hyperlocal delivery fleet, which is now 300,000+ delivery partners strong on a monthly active basis. We believe that our last mile fleet is a strong moat and it sets us up well for building one of the most meaningful hyperlocal e-commerce companies in India in the long term. We are bullish about the various use cases that we can plug our delivery fleet into, and we think we can be the primary contenders for building large businesses in hyperlocal e-commerce in India. Keeping this long term view in mind, we have started investing in hyperlocal e-commerce companies (including e-commerce enablers). Over time, the idea is to add multiple large core businesses to the existing core. Here’s how we envision this to work – 

As these businesses scale, we would want to be the provider of additional capital to these businesses and consolidate our stake leading to a potential merger at some point (at least in some cases, if and when the founders of these companies want to). In the worst case, we would want these investments to generate huge learnings and great financial returns for Zomato. 

We want to take an investment route to building these businesses instead of building them in-house. This strategy is inspired by the likes of Alibaba and Tencent, where they invested behind the ecosystem at large, created multiple M&A options for themselves, and in the worst case of M&A not panning out, realised windfall financial gains from their investments in market leaders across different categories.

All our investments are a mix of math and chemistry. We are only investing behind founders we believe have the ability to create market leaders in their spaces – so much so that we don’t think we will ourselves be able to create similar businesses in-house that will beat the companies we are investing behind. Along with infusing capital into these category leaders, we will explore synergies and areas of collaboration amongst these partner companies to drive the best outcomes for the entire ecosystem including our partner companies.

Within all the businesses that we are looking at today, quick-commerce (delivery of products in less than 30 minutes) is clearly emerging as one of the most promising ones. While we decided to not build quick-commerce on our platform, we are excited about the progress our partner company Grofers has made in the 10-min delivery space. High online grocery penetration has remained elusive in India for the past 7-8 years but we feel we might be finally witnessing the inflection point here with the widespread adoption we are seeing in the 10-min delivery format. We are likely to invest more in this space in the near term.

In addition to our planned investment in Curefit as mentioned earlier as part of the Fitso divestment, we are making two new minority investments –

  1. We have signed definitive documents for investing ~$75 million in Bigfoot Retail Solutions Pvt Ltd (“Shiprocket”) for a ~8% stake as part of a larger ~$185 million round. Shiprocket is a B2B logistics-tech company that enables online commerce by providing seamless shipping and fulfillment services to direct-to-consumer (D2C) brands and omni-channel sellers. It currently serves over 60,000+ brands and merchants across categories such as apparel, electronics, beauty and personal care, grocery, among others. 
  1. We have also signed definitive documents for investing ~$50 million in Samast Technologies Pvt Ltd (“magicpin”) for a ~16% stake as part of a total round size of $60m. magicpin drives omni-channel growth for local retailers. It has a network of 170,000+ paying merchants in categories including fashion, food, electronics, grocery, pharma, entertainment across 50 cities in India.

Including our $100 million investment in Grofers earlier in August 2021, we have now committed $275 million across 4 companies over the past six months. 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.

Reflections on our performance in the last quarter
[Q2 FY22 and H1 FY22 results update]

The COVID-19 situation improved significantly for India in the last quarter after a devastating second-wave in Q1 FY22. Number of new COVID-19 cases have come down dramatically – thanks to a phenomenal effort by the central and state governments and our healthcare community in getting large parts of our population vaccinated. In less than a year, India has managed to administer 1 billion+ vaccinations, covering 75% of the eligible population with at least one dose and 30% with both the doses. 

Somewhere over the last quarter, we came to a conclusion that remote work cannot be the primary work mode if we want to build an enduring business. We believe that while remote work is employee friendly, it is not customer friendly. We are all here to serve our customers in the best way possible, and remote work led to all of us missing a lot of little things. And we believe these little things define the difference between good and great. To get our people back into the office, we initiated vaccination camps for our employees and their families, and are now proud to say that our headquarter in Gurugram is fully operational with every employee vaccinated, and RAT/RT-PCR tests are being conducted for every person once a week. We believe this is the new normal where people are primarily working out of a shared space, but still have the flexibility to go remote a few days/weeks in a year whenever someone needs a change in environment. Most of our employees are happier working live from the office – they now value the benefits of social interactions and in-person coaching and learning – something that we all used to take for granted pre-COVID. 

Back to business, we saw the restaurant industry bouncing back nicely in Q2 FY22. Overall customer traffic on our platform in India increased to 59 million average monthly active users (India MAU) in Q2 FY22 as compared to 45 million in Q1 FY22. As we head into the festive season, we believe that almost all the restaurants across the country are open for business today. The restaurant industry was one of the most severely impacted sectors from the COVID-19 pandemic and it gives us immense joy to see the restaurant community getting back up on their feet after a prolonged phase of uncertainty for the past 18 months. 

Adjusted Revenue in Q2 FY22 was INR 14.2 billion ($189 million), a 22.6% growth quarter-over-quarter (“QoQ”) and 144.9% growth year-over-year (“YoY”). 

Adjusted Revenue for H1 FY22 was INR 25.8 billion ($344 million), a sequential growth of 50.1% over H2 FY21 and 178.2% YoY growth over H1 FY21.

Adjusted EBITDA loss increased to INR 3.1 billion ($41 million) in Q2 FY22 as compared to INR 1.7 billion ($22 million) in the previous quarter (Q1 FY22) and INR 0.7 billion ($10 million) in Q2 FY21 last year.   

On a half-yearly basis, Adjusted EBITDA margin decreased to -18% in H1 FY22 as compared to -12% in the previous half-year (H2 FY21) and -13% in H1 FY21 last year. 

Why did our losses go up? This was due to investments in the growth of our food delivery business. Three reasons to be specific – a) increased spending on branding and marketing for customer acquisition, b) increased investments and growing share of smaller/emerging geographies in our business (which are less profitable today compared to more mature cities) and c) increased delivery costs due to unpredictable weather and increase in fuel prices. 

Let’s dive deeper into the performance of our food delivery business to understand this better.

India food delivery

India food delivery Gross Order Value (“GOV”) in Q2 FY22 grew by 19% QoQ and 158% YoY to INR 54.1 billion ($721 million). This growth was driven by an increase in the number of transacting users, number of active food delivery restaurants and active delivery partners on our platform, as can be seen from the table below. 

In line with GOV growth, Adjusted Revenue for India food delivery grew by 20.7% QoQ to INR 12.5 billion ($166 million). This represents ~88% of the total Adjusted Revenue for our company in the same quarter.

We can attribute a large part of the increase in transacting users (and adjusted revenue) to an increase in branding and marketing expenses. During Q2 FY22, we invested incremental ~INR 0.4 billion ($5.4 million) in branding and marketing as compared to Q1 FY22. Most of these spends were on television and digital marketing. The idea was to capitalize on the COVID-led Q1 FY22 growth momentum and acquire more new users as well as get a large number of lapsed users back on our platform. While this resulted in our losses expanding further, we believe this was a great opportunity to double down on expanding our user base cost efficiently. Please note that these expenses are not included in the definition of Contribution (they are below Contribution).

On the profitability front, the Contribution as a % of GOV was 1.2% in Q2 FY22 as compared to 2.8% in Q1 FY22. The reduction in Contribution margin is on account of the following –

  • Increased investments in growth geographies – growing share of smaller, emerging cities in our business, which are currently less profitable than the more mature cities 
  • Increase in delivery cost per order (~INR 5 per order increase in Q2 FY22 as compared to Q1 FY22)

After a hiatus of two years, we have started launching food delivery in new cities again. Over the years, we have seen the penetration of food delivery grow in emerging cities. To start with, these emerging cities are both demand and supply deficient but that changes once we help kick-off the demand-supply flywheel in a particular city. We do this by incentivizing the customers to try restaurant food and once habit formation starts kicking-in, we see more restaurants opening-up which in turn leads to more demand as customers get more choices. Over time, as this flywheel matures, we see a rapid growth in the order frequency as well as profitability of a particular city. 

To substantiate this point further, we see a ~30% higher ordering frequency and significantly higher Contribution margin in cities which have a meaningfully higher ‘restaurants per 100k customers’ metric. 

1) Data in above charts is for Q2 FY22
2) Cohort A and B represent cities with different ‘restaurants per 100k customers’ metric. Cohort B cities are substantially higher on this metric as compared to Cohort A

We are investing in seeding more of these emerging cities today and giving them enough time to grow into large and profitable markets for us in the years to come. 

While Cohort B cities continue to grow rapidly (58% GOV growth over the past 2 quarters), their share of total GOV on our platform has shrunk by 2 percentage points in the same period as the pace of growth of emerging cities is much higher.

The delivery cost per order increased by INR 5 per order in Q2 FY22 as compared to Q1 FY22. This was on account of the following –

  • Prolonged and unpredictable rainy season (which still continues in many parts of the country, oddly)
  • Sharp increase in fuel prices

We don’t expect the delivery costs to go up further and overall feel confident about our Contribution margin staying positive in the mid, as well as long term.

Dining-out and Hyperpure

While restaurants have started opening-up for dining-out, revenue from dining-out ad-sales in India continues to remain small since the COVID-19 outbreak last year. It will take a while for restaurants to start spending on ads again as they cautiously get back to operations. 

At the same time, opening-up of restaurants has made the Zomato Pro membership more valuable for customers since that unlocks the second leg of benefits for them in addition to the benefits they get on food delivery. As a quick recap, Zomato Pro is a customer membership program where customers pay us for quarterly/annual membership and as members they get deals and discounts at partner restaurants – both while eating at these restaurants as well as when they order food. These discounts are funded by our restaurant partners as they see incremental growth coming out of being a Zomato Pro restaurant partner. We also launched Zomato Pro Plus last quarter which is an invite only membership with additional benefit of free delivery on all orders. Unlike in case of Zomato Pro, the free delivery in case of Zomato Pro Plus is funded by Zomato. Between Zomato Pro and Pro Plus, we now have 1.5 million members and over 25k restaurant partners in India as at the end of Q2 FY22.

Last but not the least, revenue from our B2B supplies business Hyperpure grew by 49% QoQ to INR 1.1 billion ($15 million) in Q2 FY22. Hyperpure is now present in 8 cities and we supplied to over 12,000 restaurants every month on an average in Q2 FY22. 

That is it from our side, for now. 

One last thing – we have heard that a public listing changes a number of things for companies. We are adamant that we will not let our IPO change anything, and we aren’t going to morph into a QSQT business (‘quarter-se-quarter-tak’). We will continue to focus relentlessly on the long term.

As always, we remain grateful to our shareholders, who have believed in us and in the long-term view of our business. 

Stay well,

Deepinder (Founder & CEO) and Akshant (CFO)

Note: If you have any questions or clarifications, please write to


  1. Adjusted Revenue and Adjusted EBITDA reconciliation 

The following table reconciles audited revenue from operations and stated loss for the period (as per IND AS) with Adjusted Revenue and Adjusted EBITDA.

  1. INR / USD exchange rate assumed to be at 75
  2. Zomato Limited’s financial year ends on 31 March of every year
  3. Glossary


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