Zomato’s Stock Crashes 9% After CEO Goyal Fails to Deliver on Profitability

A business that delivers Indian cuisine to your home In 2008, Zomato opened its doors for the first time to the general public. The corporation has, among other things, lost a lot of money as a result of its efforts to expand and transform.

In contrast, Zomato’s stock price increased by 9 percent when the business’s CEO stated that the company might be able to generate profits. This blog post will discuss current events and their impact on the organisation. In addition, the report will discuss the company’s successes and challenges.

Zomato’s Recent Growth

The recent success of Zomato can be attributed to a number of factors, including the company’s development into new markets, acquisitions of other firms, and extension of its service offerings.

Currently, the corporation conducts business in over ten nations, including India, the United Arab Emirates, and the United Kingdom. By entering these new areas, the corporation is expected to earn more money and increase its market share. The corporation has lately acquired multiple companies, including Uber Eats in India in 2020, which will improve its market position.

The extensive menu on Zomato has also contributed to the site’s growth. Even though meal delivery is still its primary business, the company has expanded into related industries such as restaurant discovery, online food ordering, and food reviews.

By adding new features and enhancing old ones, Zomato has been able to provide its clients with a more comprehensive service, resulting in increased customer loyalty and revenue.

The COVID-19 outbreak, which has increased demand for food delivery services, has also contributed to Zomato’s expansion. People are increasingly purchasing food online, and Zomato has been able to capitalise on this trend to generate more revenue.

CEO Goyal’s Suggestion of Profitability

In a recent letter to colleagues, Zomato CEO Deepinder Goyal expressed confidence in the company’s profitability. “We are confident in our ability to be profitable,” he said.

Not only at the EBITDA level but also at the net level, which includes all expenses and costs. The stock rose 9% in a single day as a result of investors’ approval of the news. This gave the corporation an approximate $12 billion market value.

Zomato has been losing money for a long time, so the possibility that it will begin producing money is significant. Although the company’s revenue has expanded rapidly, its efforts to diversify and expand have been costly. The CEO’s estimate of the company’s profitability demonstrates that it is already profitable as a result of the company’s efforts.

Factors Contributing to Zomato’s Potential Profitability

The ability of Zomato to generate revenue has been impacted by a number of external factors. It is crucial to improve the distribution network’s functionality.

Zomato has invested heavily in its delivery infrastructure, making it faster and more affordable. By enhancing its distribution network, Zomato has decreased the amount of time required to service consumers. This has increased client satisfaction and loyalty.

In addition to higher restaurant commissions, Zomato might begin to generate revenue by increasing restaurant commissions. Zomato has made more money in recent years by negotiating higher commission rates with restaurants.

This relationship is beneficial for both Zomato and restaurants. If Zomato advertises on the restaurant’s website, the restaurant may receive more customers, and Zomato may receive higher commissions.

The company’s emphasis on reducing expenses and enhancing operational efficiency has increased the likelihood that Zomato will become profitable. The company has worked very hard to cut costs, mostly by getting rid of departments that weren’t needed and making marketing and advertising better.

Zomato is another company that has profited from digitization and the expanding use of technology in the food industry. Zomato has been effective in making life easier for its consumers by providing a single location to search for restaurants, place online orders, and receive meal delivery. This increases both customer retention and the business’s overall success.

Challenges Facing Zomato

Even though there have been some recent signs suggesting that Zomato may be able to make profits, the company is still dealing with a number of obstacles. The threat of competition from other businesses operating in the same sector, such as Swiggy, an Indian food delivery company that holds a substantial portion of the market, is one of the primary sources of anxiety.

Because of competition, Zomato’s sales growth has slowed, and as a result, it is becoming increasingly important to give discounts and other advantages to customers as well as restaurants.

Zomato also needs to think about the implications of any applicable regulations. Recent legislation in a number of countries places various restrictions, including time limits on deliveries and price caps. Zomato’s revenue has declined while its expenses have increased as a direct result of the regulations that have been imposed.

The spread of COVID-19 has additionally resulted in serious repercussions for Zomato’s business. The ever-increasing demand for food delivery services has put a strain on the distribution network and forced hefty additional spending on safety measures to protect delivery staff. This has resulted in a reduction in revenue, which is harmful to the company.

There will be many challenges for Zomato to face as the company continues to develop and prosper. One of the most challenging things to do is strike a balance between providing excellent service to customers and increasing financial gain.

The success of Zomato can be attributed, in large part, to the company’s dedication to offering outstanding customer service. Any departure from this standard carries with it the possibility of turning off clients.

Zomato faces the same challenges in trying to come up with innovative ideas and keep one step ahead of the competition. As the meal delivery sector grows, more companies will enter the market; as a result, Zomato will need to give its clients a service that is distinct from that of its competitors.

For example, Zomato can preserve its lead in the competitive restaurant industry by investing in new technology. The business has already made significant investments in its information technology infrastructure, which includes a chatbot powered by artificial intelligence that customers can use to place orders and receive restaurant recommendations.

In order for Zomato to remain competitive, the company will need to consistently develop new ideas. Despite this fact, there is potential for growth inside the company.

Zomato has the potential to differentiate itself even more from its competitors by entering new markets. The company has made significant investments in emerging countries like the Middle East and Southeast Asia in order to capitalise on their growth. As the business grows, it may investigate the possibility of expanding into new markets, such as those in the United States and Europe.

It is possible that a significant portion of Zomato’s success can be attributed to the company’s capacity to respond effectively to evolving market conditions and develop creative solutions to meet the needs of clients.

The company has hinted that it may soon earn a profit despite the recent problems that it has been experiencing. There is still a lot of work to be done, but in order for the company to keep up with the competition, they need to keep investing in their operations and coming up with new ideas.

Conclusion

Zomato has announced in recent news that the company may have the ability to make revenue. The organisation, which has been through a lot in recent times, has made huge advancements thanks to this latest development.

The expansion of the company’s product range, as well as its reach into new markets and participation in mergers and acquisitions, are all aspects that have played a part in the business’s success in recent years. The COVID-19 epidemic is another reason why there has been a recent uptick in the number of people using meal delivery services.

Zomato’s increasing revenue can be attributed to higher restaurant commissions, an improved and more streamlined delivery system, and an increased focus on minimising overhead expenses. The food industry’s growing use of new technologies and digitization practises has also been beneficial to the company’s bottom line.

Despite the fact that this is very encouraging news, Zomato continues to face challenges in the form of obstructions such as the law, market competition, and the COVID-19 epidemic. Because the company has made investments in becoming more efficient and spending less money, investors are optimistic about the company’s potential future performance.

Edited by Prakriti Arora