Food delivery average order values may remain flat over next year: Zomato CFO

Zomato also saw the gross order value of its food delivery business shrink about 1 percent to Rs 6,569 crore in the March quarter due to an industry-wide slowdown and its exit from 225 cities in the previous quarter

Average order values (AOV) in the food delivery sector may remain flat over the next one year even as food inflation remains range-bound, according to Zomato chief financial officer Akshant Goyal.

Zomato’s AOV has marginally increased for the past year — growing 2 percent from Rs 398 in FY22 to Rs 407 in FY23 at a time when the food inflation index swung between 4.2 percent and 8.2 percent.

“Inflation has been pretty range bound for the last few months, but I think AOV is still strong and if at all, trending upwards. So at this point, it feels like if you look forward to next year, you don't expect the AOVs to fall. Maybe they will remain flat,” Goyal said in a post-earnings call with analysts.

Zomato also saw the gross order value of its food delivery business shrink about 1 percent to Rs 6,569 crore in the March quarter due to an industry-wide slowdown and its exit from 225 cities in the previous quarter.

Average monthly transacting users (MTUs) also fell from 17.4 million to 16.6 million, sequentially, the food aggregator said in its March quarter earnings last week.

The company’s management ascribed the fall in MTUs to the re-introduction of its loyalty programme — called Zomato Gold — during the quarter.

“Because of Zomato Gold, actually the MTU number has come down and not gone up. We are seeing an impact of clubbing some orders in the same households which might have just a single membership. Zomato Gold, in fact, we think has led to a reduction in MTUs and not an increase. While the order frequency goes up, the number of people ordering typically goes down,” Goyal explained on the call.

Responding to a question on its average commission from restaurants being at 18 percent, the company said that it expects the take-rate to increase going forwards as eateries realise more value from their association with the food delivery platform.

“We want the commission rates to be competitive and we still think we are lower than what the competition is charging. So, I think as we continue to add more value to restaurant businesses, we expect some improvement in commission revenue going forward,” said Goyal.

Zomato's revenue from operations came in at Rs 2,056 crore, rising 69.66 percent from Rs 1,211.8 crore in the corresponding quarter year ago, Zomato said in a regulatory filing.

The company said its business, excluding quick commerce, turned adjusted EBITDA positive in the March quarter, driven by the food delivery business generating Rs 78 crore of EBITDA. Zomato added that it plans to get positive adjusted EBITDA and PAT on a consolidated basis including quick commerce in the next four quarters.

Deepinder Goyal, co-founder of Zomato, said the company will get to the goal by increasing profits in the food delivery business and reducing losses in the quick commerce (Blinkit) business.