India’s Zomato posts surprise Q2 profit; sees food orders rising further

India's Zomato posts surprise Q2 profit; sees food orders rising further

India’s leading food delivery platform, Zomato, has once again defied expectations by posting its second consecutive quarterly profit. The surprising result is largely attributed to the surge in food delivery orders, with the company anticipating further growth during the ongoing festive season.

In the second quarter ending on September 30, Zomato reported a net profit of 360 million rupees ($4.3 million), surpassing analysts’ expectations, which had predicted a loss of 201.7 million rupees. This marked a significant turnaround from the losses the company reported in the previous year.

The company’s Gross Order Value (GOV), which represents the total value of all food delivery orders, experienced a substantial 20% growth in the foods business segment. This growth was driven by an increase in order volumes and the more frequent use of the service by customers with the paid “Gold” subscription.

As a result of these positive developments, Zomato’s shares closed the session with an impressive 8.3% gain, contributing to year-to-date gains of over 96%.

Looking ahead to the third quarter ending on December 31, Chief Financial Officer Akshant Goyal anticipates that GOV in the segment could grow between 25% and 30%. This optimistic outlook is aligned with the upcoming festive season in India, which typically witnesses increased consumer spending on items ranging from sweets, snacks, to clothing, driven by celebrations such as Christmas and the Hindu festival of Deepavali.

Rakesh Ranjan, CEO of Zomato’s food business, acknowledges that the festive period usually presents a mix of trends for the food delivery industry, as people divide their spending between dining out and ordering in. He also notes that the ongoing Cricket World Cup, spanning from October 5 to November 19, is expected to boost orders but cautions that the demand surge will be limited to match days.

The consistent growth of online food ordering in recent years has led to fierce competition among delivery service providers in India, with Zomato and its rival Swiggy expanding aggressively to capture market share. In the second quarter, Zomato’s revenue from operations skyrocketed by more than 71%, reaching 28.48 billion rupees.

Zomato’s remarkable turnaround and consecutive profits underscore the resilience and adaptability of food delivery platforms in a rapidly evolving consumer landscape, positioning them as key players in India’s vibrant food technology industry.

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