Covid-19 disrupted most businesses and foodtech majors Zomato and Swiggy were no different with their scale shrinking over 20% during FY21. But the two companies seem to have bounced back during FY22, as numbers reflect.
After witnessing a dip of 24% in scale during FY21, Zomato’s gross revenue grew over 2X to Rs 4,192 crore during the fiscal year ending March 2022. Swiggy, whose scale also contracted by 27% in FY21 managed to grow 2.2X to Rs 5,705 crore during FY22, as per Fintrackr’s analysis of the companies’ annual financial statements.
Growing revenue verticals
Both Zomato and Swiggy primarily drive revenue from online platform services such as sale of food, advertisement, subscription, delivery facilitation et al to users, restaurant partners and the delivery partners. Their online platform facilitates food ordering and delivery of the food items by connecting the end users, restaurant partners and delivery personnel.
Zomato and Swiggy made around 87% and 60% of their operating revenue from food delivery and other platform services. Collection of Zomato from the same ballooned 2X to Rs 3,651 crore whereas Swiggy reported over 83% growth to Rs 3,444 crore during FY22.
These numbers align with market reports as well, where according to a Bernstein report, the food delivery market share started to tilt slightly to Zomato with a 55% market share in 2022.
Other sources of revenue for Zomato include its B2B fulfillment vertical HyperPure which is a farm-to-fork supplier to restaurants in India and its sales grew 2.7X to Rs 541 crore during the year. As for Swiggy, where it lags relatively (food), it compensates through its recently-acquired strength: grocery. Swiggy’s sale of grocery, FMCG and other food items from private labels shot up 3.9X to Rs 2,123 crore in FY22.
Zomato acquired Blinkit last year in a bid to compete with Swiggy on quick commerce, but those numbers will reflect in the next fiscal.
Zomato and Swiggy also earned Rs 495 crore and Rs Rs 415 crore, respectively, as other non-operating income (interest income) taking the total income to Rs 4,687 crore and Rs 6,120 crore in FY22.
Rising outsource support and promotional expenses
While digging deeper into the financial statements Fintrackr found that outsourcing support costs including delivery and manpower related charges was the largest cost center for both the companies. For Zomato, this cost shot up 3.4X to Rs 1,986.4 crore in FY22, and for Swiggy the same cost blew up 2.3X to Rs 2,350 crore.
Zomato’s spending on employee benefits grew 2.2X to Rs 1,633 crore while Swiggy’s cost on the same went up 57.4% to Rs 1,708 crore during the fiscal year ending March 2022. Importantly, these costs included Rs 878 crore and Rs 513.4 crore worth shares based payment (non-cash expenses).
With the rising scale, Zomato’s expense on the cost of product procurement rose 2.7X to Rs 524.6 crore in FY22. Swiggy’s expense on the same shot up 4X to Rs 2,268 crore during the year which could be attributable to Swiggy’s grocery biz via Instamart.
Zomato also incurred promotional and IT (server and support services) cum communication costs of Rs 1,217 crore and Rs 289 crore in FY22 which drove its total expenses up by 2.4X to Rs 6,205 crore during the year. On the other side, Swiggy booked promotional and IT & communication costs of Rs 1,849 crore and Rs 330 crore. In total, Swiggy’s annual expenses shot up 2.3X to Rs 9,574 crore in FY22.
Bleeding bottom lines
Zomato and Swiggy’s losses spiked 49.8% and 124.4% respectively to Rs 1,222 crore and Rs 3,629 crore during FY22 as opposed to Rs 816 crore and Rs 1,617 crore in FY21. Moreover, the outstanding losses of both of the entities climbed to Rs 6,726 crore (Zomato) and Rs 22,880 crore (Swiggy) at the end of FY22.
Heading towards ratios, Zomato and Swiggy registered an EBITDA margin of -28.92% and -52.88% respectively. On a unit level, Zomato spent Rs 1.48 to earn a rupee of operating revenue whereas Swiggy spent Rs 1.68 to earn the same during FY22.
Zomato’s IPO was fully subscribed on its launch day and got listed at a price of Rs 116 per share on Jul 23, 2021 however, its price is currently hovering at around Rs 58-61 per share. During the last quarter of FY22, Swiggy turned decacorn attaining a $10 billion valuation after raising a $700 million round led by Invesco. On the other hand, Zomato’s market cap currently stands at $5.7 billion.
Zomato’s revenue from food might be marginally higher than that of Swiggy’s, but the latter has surpassed overall scale through its increased focus on grocery delivery. Even as Zomato and Swiggy are said to be neck and neck in competition through the years, Swiggy is larger in scale with respect to overall revenues by over Rs 1000 crore. That said, only next year’s numbers will tell if Blinkit’s acquisition by Zomato can change things for the Gurugram-based company. Even if it does, however, it will come with a jump in losses too, as Zomato capitalizes acquisition related expenses. That will shift focus back on cash flows. Zomato of course has been pushing hard to reduce losses faster, to keep up with market expectations, and support a sagging stock price. Ironically, that stock performance will go a long way in helping Swiggy management decide on their own date with the public markets.