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Zomato to forgo commission from restaurants on food orders

LiveMint logoLiveMint 18-09-2017 Mihir Dalal

Bengaluru: Restaurant discovery and food ordering platform Zomato Media Pvt. Ltd, which is in talks to raise fresh capital, said it will forgo commissions charged to restaurants on food orders as it is generating cash in its core advertising business to fund new initiatives, including food ordering.

The move by Zomato comes as the company pushes hard to catch up with arch rival Swiggy (Bundl Technologies Pvt. Ltd), the largest food ordering platform in India.

Zomato also said it is now a “profitable” company. A Zomato spokesperson said the company was generating Ebitda (earnings before interest, tax, depreciation and amortization) without specifying the period.

“… throughout the 24 countries where we operate, and across all our businesses, we are starting to make money. Our core advertising business in India, Southeast Asia, and the Middle East—the three key regions for us, is generating enough cash to cover for the millions of dollars of investments we are making into the rest of the regions, and our new businesses (like online food ordering, table reservations, Zomato Gold, Zomato Base, etc.),” Zomato chief executive Deepinder Goyal said in a blog post on Monday.

Zomato has set criteria including weekly orders for restaurants who want to qualify for its zero-commission scheme. Goyal said 70% of its restaurant partners qualify for the zero-commission scheme. Restaurant commissions comprise some 15% of Zomato’s sales.

Sales at Zomato jumped 80% to $49 million in year ended March 2017, helped by growth in the advertising and food delivery business. The company reported an operating Ebitda loss of Rs151.9 crore last year.

Mint reported on 5 September that Zomato, which has received roughly $225 million in cash from investors, is talks to raise $100-200 million from Ant Financial Services Group, an arm of Alibaba Group Holding Ltd.

Swiggy, too, is well-funded, having raised $80 million from Naspers Ltd, Accel Partners, SAIF Partners and others in May.

While Zomato started out years before Swiggy, the latter blindsided Zomato in 2014 and 2015 with the fast expansion of its food delivery services.

Zomato, which had avoided the food delivery until then, was forced to launch its own service. Since then, the two companies have been locked in a capital-intensive fight for the food delivery market.

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