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Sharp recovery across operational metrics in Mar-21

Zomato’s RHP hints at a continued sharp recovery across key operational metrics in Mar-21 – (1) restaurant count, (2) MAU, (3) MTU, (4) # orders and (5) GOV. The robust increase in signed up restaurants on delivery / discovery platforms (~16k / 40k) is the most interesting update – given it comes amidst negative news flow about ‘perceived’ dissatisfaction of ‘some’ restaurants with Zomato. End – Mar21, restaurant count on delivery platform was ~5k more than even the pre-covid peak. Despite office resumption to an extent in Mar-21, AOVs remained stable at ~Rs395. GOV retention in older cohorts (FY17 & FY18) was reasonably strong despite covid impact in FY21. Expectedly, retention in newer cohorts (FY19 & FY20) saw a bigger drop. In our view, these cohorts are largely outside the urban core where food services faced more serious logistical constraints (v/s Top-20) due to lockdowns. Unit economics, contribution dropped led by – higher delivery cost, discounts and advertising expenses. We noticed a broadly similar trend across internet (including Infoedge) in Mar-21 where encouraging signs of traffic recovery in turn led to companies spending more on advertising and sales promotion. For reasons elaborated in our thematic note (link), we continue to maintain a constructive view on food-tech sector.

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