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Zomato to stop charging commissions to high-turnover restaurants

19 September, 2017

Restaurant listings and food ordering firm Zomato will forgo commissions charged to restaurants clocking high order volumes as it looks to take on Naspers-backed rival and market leader Swiggy.

“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.),” the company said in a blog post.

Restaurant partners will need to fulfil certain criteria to qualify for zero commission, such as the number of orders processed and how satisfied the customers are with its food and service, the blog post said. The programme is likely to cover 70% of its restaurant partners, it added.

Zomato also claimed it was now a profitable company, saying “throughout the 24 countries where we operate, and across all our businesses, we are starting to make money”. It didn’t specify any more details.

Zomato Media Pvt. Ltd reduced its cash burn substantially and grew revenue rapidly in the year through March 2017. Cash burn dropped 81% to $12 million in 2016-17 from $64 million the year before while revenue surged about 80% to $49 million. Revenue from the food ordering business jumped eight-fold to almost $9 million.

Media reports said last week that the company might receive as much as $200 million (Rs 1,283 crore) from Chinese Internet giant Alibaba. Buoyed mainly by this news, the stock of its largest shareholder, Info Edge (India) Ltd, surged 21.5% last week. Last Friday, brokerage Nomura valued the company at $1.4 billion, higher than its estimated valuation of $800 million-1 billion in media reports.

Zomato was founded in 2008 by IIT-Delhi alumni and former Bain employees Deepinder Goyal and Pankaj Chaddah. It is present across 13 Indian cities, and at three locations in the UAE. The company was valued at over $1 billion in September 2015 following a $60 million investment by Singapore government’s investment company Temasek and existing investor Vy Capital. It had subsequently raised $50 million led by parent Info Edge in April 2016.

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Zomato to stop charging commissions to high-turnover restaurants

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