Zomato's FY20 ad & sales promotion expense jumps to Rs 1326.6 cr

According to Tofler, the total income of the company has more than doubled to Rs. 2485.7 crore from Rs. 1255 crore, recording an approximate 100% growth over the previous year

e4m by exchange4media Staff
Updated: Jan 12, 2021 8:44 AM

Online food delivery platform Zomato Private Limited has reported an increase in its advertisement and sales promotion expense at Rs 1326.6 crore for the fiscal ended 31st March 2020 compared to Rs 1218.27 crore in the previous fiscal, according to financial data accessed by business intelligence platform Tofler.

In the regulatory filing, Zomato noted that the amount in excess of the revenue earned from the transacting users is recorded as advertisement and sales promotion expenses. The incentives offered to the transacting users are considered as payment to customers and recorded as a reduction of revenue on a transaction by transaction basis.

Similarly, when incentives are provided to transacting users where the company is not responsible for delivery, the transacting users are not considered customers of the company, and such incentives are recorded as advertisement and sales promotion expenses.
The company refused to comment on the FY20 financial results.
On a standalone basis, Zomato incurred a net loss of Rs. 2451.1 crore as compared to a net loss of Rs. 940.4 crore. The total income of the company has more than doubled to Rs. 2485.7 crore from Rs. 1255 crore, recording a growth of approximately 100% over the previous year. The total expenses during the year have increased to Rs. 4627.7 crore in the current year from Rs. 3383.5 crore.

On a consolidated basis, the company posted a net loss of Rs. 2385.6 crore from Rs. 1001.1 crore. Total income more than doubled to Rs. 2742.7 crore as compared to Rs. 1397 crore in the previous financial year. The total expenses during the year have increased to Rs. 5006.3 crore from Rs. 3598 crore.

Zomato’s primary revenue source is through Ad Sales, Online Ordering, and Zomato Gold business segments.

In the regulatory filing, the company noted that its ad sales, online ordering and gold subscriptions continued to grow. Unit economics in online ordering improved significantly with increased revenue, lower logistics costs, and user discounts.

The company explained that advertising revenue is derived principally from the sale of online advertisements which is usually run over a contracted period of time. The revenue from advertisements is thus recognised over this contract period as the performance obligation of the Company is met over the contract period.

There are some contracts where in addition to the contract period, the company assures certain “clicks” (which are generated each time users on our platform clicks through the advertiser’s advertisement on our platform) to the advertisers. In these cases, the revenue is recognised when both the conditions of the time period and the number of clicks assured are met.

Post 28th October 2019, the company is merely acting as a platform provider for delivery partners to provide their delivery services to the Restaurant partners and not providing or taking responsibility for the said services. For the service provided by the company to the delivery partners, the company may charge a platform fee from the delivery partners.

The company stated that its focus on efficiencies and bringing down costs has helped it bring down the overall burn rate significantly. The dine out business is increasingly shaping towards a transactions business, focussing on the closure of transaction with user settling through the Zomato app. Products like contactless dining, Gold Specials, etc are in this direction.

The company acquired Uber Eats during the year under review, to become the market leaders in delivery business. The B2B supplies business in Zomato Internet Private Limited (Hyperpure), wholly owned subsidiary of the Company grew many folds.

Zomato also said that Covid-19 pandemic resulted in a significant drop in order volumes and also caused a huge reduction of dine out revenue. The company added that it working on number of products to address this loss, like introducing contactless dining and delivery / takeaway products in certain geographies outside of India.

"The food@work business under the entity Tonguestun Food Network Private Limited (cafeteria meals business) is also impacted due to Covid-19, as large number of working people, have been working from home which has resulted in trimming down of the business in line with current market requirements. Decisions to continue in cities or not for the delivery business were also taken after analysing the market potential and profitability," the company stated.

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