Zomato Ltd Management Discussions

Consolidated audited profit and loss account

(INR million)

Particulars	FY23	FY22
Income
Revenue from operations	70,794	41,924
Other income	6,815	4,949
Total income	77,609	46,873
Expenses
Cost of goods sold	13,952	5,246
Employee benefits expense	14,650	16,331
Finance costs	487	120
Depreciation and amortisation expenses	4,369	1,503
Other expenses	54,295	38,855
Total expenses	87,753	62,055
Loss before share of profit / (loss) of an associate, exceptional items and tax	-10,144	-15,182
Share of profit / (loss) of an associate and joint venture	-3	3
Exceptional items	1	2,974
Loss before tax	-10,146	-12,205
Tax expense	-436	20
Loss for the year	-9,710	-12,225

Income

Consolidated revenue from operations increased by INR 28.9 billion (69% YoY)to INR 70.8 billion in FY23 from INR 41.9 billion in FY22. Growth in revenue from operations can be attributed to growth in food delivery and Hyperpure business and due to the addition of quick commerce, a business which was not consolidated in our books, a year ago.

a) Food delivery revenue from operations grew by INR 11.2 billion (33% YoY) to INR 45.3 billion in FY23 from INR 34.1 billion in FY22. FY23 commission and other income growth was primarily driven by GOV growth and take- rate expansion. Ad income increased during FY23 as we witnessed restaurants increasing their marketing budgets on our platform post COVID and also on account of ad inventory expansion driven by product upgrades.

(Note: Food delivery revenue as per the financial statements is different from the food delivery Adjusted Revenue that we have presented on page 13 and page 20 as that also includes the customer delivery charges that we collect on behalf of delivery partners from customers. Adjusted Revenue is a metric tracked by the management to analyse the business performance. Refer page 35 for the reconciliation between consolidated Adjusted Revenue and revenue from operations)

b) Hyperpure revenue grew by INR 9.7 billion (180% YoY)to INR 15.1 billion in FY23 from INR 5.4 billion in FY22 primarily driven by growth in number of unique restaurants served by Hyperpure from ~51k in FY22 to ~72k in FY23. Many of the new cities that were launched in FY22 have grown in scale in FY23, which contributed to the growth of the business. In addition, Hyperpure also tapped into the quick commerce opportunity and started supplying goods to sellers on Blinkit platform in FY23.

c) Quick commerce business has been consolidated in the books of accounts of Zomato Limited post 10- Aug-22 and contributed INR 8.1 billion of revenue in FY23.

d) Others revenue contribution decreased marginally in FY23 to INR 2.3 billion from INR 2.4 billion in FY22 primarily on account of discontinuation of the food delivery services that we offered to Talabat in UAE which was a pass-through revenue (EBITDA neutral)from Nov-22 onwards. The impact of this discontinuation was largely offset by revenue generated through Zomato Live business which was re-launched in FY23 post the pandemic. FY22 revenue also included revenue from the Nutraceutical segment and Lebanon business, which were discontinued by the Company in FY22.

Other income increased by INR 1.9 billion (38% YoY) to INR 6.8 billion in FY23from INR 4.9 billion in FY22 on a consolidated basis. Increase in other income was primarily driven by increase in treasury income on account of increase in interest rates during the year. Also, the company had funds available for a longer duration in FY23 as compared to FY22 as IPO proceeds were available for 8 months in FY22 vs for the full year in FY23. Part of the increase in Other income was also due to increase in the interest income earned on loan given to Blink Commerce Pvt. Ltd.(BCPL)forthe period prior to acquisition of BCPL.

Expenses

Cost of goods sold (COGS) increased by INR 8.7 billion to INR 14.0 billion in FY23 from INR 5.2 billion in FY22.

COGS primarily relates to the Hyperpure business and has increased in line with the growth in the Hyperpure business during the year. Gross margin improved in the Hyperpure business YoY on account of economies of scale and due to introduction of delivery charges on certain orders below a minimum order size threshold. FY22 COGS also included inventory purchased for the Nutraceutical business which was discontinued in FY22.

Employee benefits expenses primarily include salaries, wages, bonuses and share-based compensation paid to our on-roll employees across our consolidated operations. These costs, on an aggregate basis, decreased to INR 14.7 billion in FY23 from INR 16.3 billion in FY22 primarily on account of lower share-based payment expenses. Share based payment expense declined by INR 3.7 billion YoY to INR 5.1 billion FY23 from INR 8.8 billion in FY22

Note:

Detailed audited financial statements are provided in Financial Statements section from page 136 of this report. largely due to reduction in ESOP accounting charge broadly in line with the accounting treatment for ESOPs explained on page 28 of our last years annual report. Reduction in share-based payment expense was partially offset by increase in salaries and wages. This increase was largely driven by inclusion of Blinkits employees on the Companys payroll post the closing of the Blinkit acquisition and new hiring done during the year. Zomato, at a consolidated group level, had a total headcount of 6,173 as on March 31,2023, as compared to A,204 as on March 31, 2022.

Depreciation and amortization expense increased to INR 4.4 billion in FY23 from INR 1.5 billion in FY22. This increase was primarily on account of amortization of the intangible assets which were created at the time of the Blinkit acquisition (under business combination accounting as per Ind AS 103 Business Combination)and due to depreciation on Right of use assets primarily pertaining to the Blinkit business. Please refer to note 32(a) of consolidated financial statements on page 198 for more details.

Other expenses

(INR million)

Particulars	FY23	FY22
Delivery and related charges	25,369	18,141
Advertisement and sales promotion	12,274	12,168
IT support services, server and communication cost	3,867	2,888
Outsourced support cost	2,969	1,724
Payment gateway charges	1,551	1,187
Others	8,265	2,747
Total	54,295	38,855

Delivery and related charges primarily include payouts¹ to delivery partners for last mile deliveries across our food delivery and quick commerce operations. It also includes the delivery partner support cost and cost of consumables issued to delivery partners at the time of onboarding. These costs, on an aggregate basis, increased by INR 7.2 billion to INR 25.4 billion in FY23 from INR 18.1 billion in FY22. Increase in delivery and related charges was primarily due to (i) increase in total availability fees paid to delivery partners in the food delivery business which grew largely in line with order volume growth while availability fee per order remained broadly flat YoY and (ii) inclusion of delivery cost of the quick commerce business in the consolidated books of Zomato Limited, post closing of the Blinkit acquisition. Apart from the above, delivery partner support cost and cost of consumables has also increased during the fiscal on account of higher order volumes and increase in number of delivery partners onboarded on the platform.

Advertisement and sales promotion expenses primarily include platform funded subsidies (to the extent not netted off from revenue), marketing & branding costs, customer appeasement costs and refunds across our

Note:

7. Comprises of(i) availability fees paid by Zomato to the delivery partner over and above the customer delivery charge collected on behalf of delivery partners in the food delivery business and (ii) delivery partner payouts in the quick commerce business.

Additional notes: Adjusted Revenue and Adjusted EBITDA reconciliation

(INR billion)

Adjusted Revenue	FY23	FY22
Revenue from operations	70.8	A1.9
Add: Customer delivery charges	16.1	13.5
Adjusted Revenue	86.9	55.4
Adjusted EBITDA	FY23	FY22
Profit/ (loss) for the year	-9.7	-12.2
Less: Other income	6.8	A.9
Add: Depreciation & amortisation expense	A.A	1.5
Add: Exceptional items	0.0	-3.0
Add: ESOP expense (Share-based payment expense)	5.1	8.8
Less: Rental paid pertaining to Ind AS 116 leases1	0.8	-
Add: Tax expenses	-0.A	0.0
Add: Finance cost	0.5	0.1
Adjusted EBITDA	-7.8	-9.7

food delivery and quick commerce operations. These costs, on an aggregate basis, remained broadly flat YoY at INR 12.3 billion in FY23 compared to INR 12.2 billion in FY22 as the increase in marketing and ad spends was largely offset by decrease in customer subsidies and refunds. Marketing and advertisement expenses increased YoY in FY23 primarily due to inclusion of the quick commerce marketing spends in the consolidated books of Zomato Limited post the closing of the Blinkit acquisition, which was partially offset by a slight reduction in marketing spends in the food delivery business. Merchant and customer refunds also decreased during the fiscal driven by improved customer experience leading to lower number of refund claims.

IT support services, server and communication cost primarily include software subscription cost, server hire charges and communication costs incurred for our consolidated operations. These costs, on an aggregate basis, increased to INR 3.9 billion in FY23 from INR 2.9 billion in FY22 on account of increased traffic on the food delivery platform and consolidation of corresponding quick commerce costs in the consolidated books of Zomato Limited post the closing of the Blinkit acquisition.

Outsourced support cost primarily includes cost related to (i) call center support across our food delivery and quick commerce operations and (ii) dark store related off-roll manpower costs in our quick commerce operations. This cost has increased to INR 3.0 billion in FY23 from INR 1.7 billion in FY22 on account of increase in order volumes which required us to deploy more staff in our call centres and consolidation of corresponding quick commerce costs in the consolidated books of Zomato Limited post the closing of the Blinkit acquisition.

Payment gateway charges increased to INR 1.6 billion in FY23 from INR 1.2 billion in FY22 on a consolidated basis primarily on account of increase in GOV in FY23 and inclusion of quick commerce payment gateway charges in the consolidated books of Zomato Limited post the closing of the Blinkit acquisition.

Others includes legal & professional fee, rental expenses, general & admin expenses, insurance costs amongst others. Post the acquisition of Blinkit, in the consolidated books of Zomato Limited, this cost also includes quick commerce related costs such as warehouse management & associated logistics cost, dark store related expenses, packaging charges, etc. These Others costs, on an aggregate basis, increased by INR 5.5 billion to INR 8.3 billion in FY23 from INR 2.7 billion in FY22. This increase was primarily due to inclusion of costs related to the quick commerce business which were not there a year ago.

For details relating to our FY23 quarterly disclosures, please refer to our shareholders letters published during the fiscal.