Cloud kitchens drive majority of new restaurants additions on Zomato in Q3

The Gurugram-based food delivery company added about 16,000 restaurants in the three months to December

Zomato, which posted its third straight quarter of profits, said that cloud kitchens account for a bulk of the new restaurants being added to its platform.

The Gurugram-based food delivery company added about 16,000 restaurants in the three months to December and increased its partner base to a total of about 2,54,000 restaurants in Q3FY24. The company, however, did specify how many of those 16,000 restaurants were cloud kitchens.

Rakesh Ranjan, CEO of Zomato’s food delivery business, said that Zomato is adding two types of restaurants on its platform currently. New restaurants that are opening up in the country fall under the first category and the second bucket comprises restaurants that have been in existence but have not been on Zomato so far.

“In the first part, I would say a large chunk of what we're seeing as new restaurants today are cloud kitchens, at least on our platform. In the case of existing restaurants, it's a fairly good mix of cloud kitchens, physical format restaurants, dine-in restaurants, big chains, and so on,” Ranjan told analysts on February 8 after the company announced its results.

Zomato’s food delivery gross order value rose 6.3 percent quarter-on-quarter (QoQ) and 27 percent year-on-year (YoY) to Rs 8,486 crore, in line with the company's guidance for this quarter.

While Ranjan did not provide specifics, he said, “In terms of the new supply that is getting added a lot of that (GOV growth) is on account of cloud kitchens. Over the years, the stock of cloud kitchens has increased in the overall mix that we have on the platform.”

Zomato expects to continue growing its base of restaurants at the same pace of about 20 percent YoY in the coming quarters. The prediction comes amid an inflationary environment but cloud kitchens, and restaurants at large, say it will be difficult to pass on the price hikes.

“There is a clear slowdown in discretionary spends in the last three quarters…Interest rates reduction and inflation slowing down are two areas to look forward to. No more scope to increase prices,” said Ankit Nagori, founder, Curefoods, a cloud kitchen startup which operates brands like Eatfit, Sharief Bhai Biryani, Olio Pizza and others.

Cash balance increases

Zomato also increased its cash balance by Rs 254 crore in Q3FY24 and its total cash balance stands at more than Rs 12,000 crore. The company said it does not plan any share buyback or dividend distribution to its shareholders in FY24 or FY25 since its “business and industry structure are still young and nascent”.

It will instead let the cash compound on its balance sheet. Zomato had raised Rs 9,375 crore in its initial public offering (IPO) in 2021.