It is no secret that foodtech sector’s overreliance on the strategy of deep discounting has resulted in higher cash burn rate, eventually leading to erosion in profitability and piling up losses. Therefore it is no brainer that success of any foodtech company would depend on its ability to control its cash burn rate.
It seems that market leader Zomato has paid heeds to this critical fact as latest media reports are claiming that the Gurgaon based company has been able to halve its cash burn rate by more than 50%. Economic Times report has cited Info Edge executives’ analysts call to claim that the Gurgaon company has drastically brought down its cash burn rate. It must be noted that Info Edge, which owns job portal Naukri.com, is one of the strategic investors in Zomato.
Info Edge’s executive vice-chairman, Sanjeev Bikhchandani, claimed during the analyst call that the Foodtech major’s cash burn rate stood at $20 Mn in October 2019; far less than $45 Mn as it stood on March this year. Furthermore, another important information that came out during the analyst call was that company’s revenue has grown by three folds to reach whopping $205 Mn. The revenue stood at paltry $63 Mn during the same period last year. However, Bikhchandani did not shed any light on Zomato’s profit numbers.
A big drop in cash burn rate would give much needed impetus to Zomato as it gets ready to brace for intense competition in the wake of Amazon’s impending entry into the food delivery. Amazon is the new big fish to try its luck in the food delivery business, after Uber and Ola failed to build a profitable business despite heavy investments.
Amazon’s impending entry will also increase pressure on Swiggy and Zomato to raise more funds. It indeed would be a challenge for Swiggy and Zomato to match up with Amazon’s deep pocket.