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Zomato to withdraw from Lebanon months after going public in India

Zomato has embarked on a cleanup drive as it looks to plug the losses dragging down its balance sheet.

The Lebanon unit of Zomato Ireland Limited, a wholly-owned subsidiary of Zomato, will be shuttered by December 15, 2021, according to a disclosure made by the company with the Bombay Stock Exchange. Zomato clarified unequivocally that the move will not “materially affect the turnover/revenue of the Company” in its disclosure.

The filing also revealed that the turnover of the Lebanon Branch constituted 2.38 percent of the overall turnover in the financial year ending 2021. The branch generated a turnover of Rs 47,38,30,000 at a net worth of Rs 10,37,10,000 in 2020-21.

Zomato has been busy trimming the fat from its books ever since it went public* several months ago. The listing brought its financial fundamentals such as revenue, profit, liabilities into the spotlight raising concerns around its profitability. The move can be viewed in the context of this scrutiny. Gurugram-based Zomato posted a consolidated loss of ₹356.2 crore in the quarter which ended on June 30, 2021.

What are the reasons behind shutting down the Lebanon branch? 

“This closure is in line with our broader strategy of focusing on our core India market,” the company wrote in its submission to the BSE.

Moreover, Lebanon has been gripped by political chaos and economic uncertainty ever since it plunged into a debt crisis in 2019. With this in mind, Zomato explained that the economic crisis has also caused the currency to depreciate in the last two years.

“The situation has become worse over the past few months and as a result the business viability and future outlook for the region has deteriorated significantly,” read the statement.

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The food delivery platform added that the Lebanon business incurred losses in the quarter ending June 30, 2021. The turnover of the Lebanon Branch was Rs. 4,68,00,000 (0.55 percent of the total revenue) during the quarter that ended on June 30, 2021. 

Zomato’s been cleaning up

Here’s a look at some of its recent closures: 

United States: The food delivery firm first dissolved its table reservation business in the US, NexTable, by entering into a stock purchase agreement with Justin Doshi, Thusith Desilva, and Robert Tyree for the sale of its stake at $100,000. The company then shut down its US subsidiary— Zomato US LLC (ZUL) — to focus on its India operations. It was known as UrbanSpoon earlier. ZUL’s contribution to Zomato’s turnover stood at ni

UK and Singapore: The next two closures came in the form of Zomato’s two international subsidiaries in the United Kingdom and Singapore. Zomato UK Limited (ZUK) and Zomato Media Private Limited (ZMPL) had a net worth of Rs. 16.4 lakh and Rs. 6.5 lakh respectively.

India: Zomato exited the grocery business by ceasing operations on September 17 this year. The reasons cited by the company were gaps in order fulfillment, poor customer experience and increasing competition from rivals promising express delivery, the report added. The firm also shut down its nutraceutical business without elaborating on its reasons. The term “nutraceutical” means medicinally or nutritionally functional foods such as yogurt and supplements, among others. The company’s departure coincided with the government’s plan to introduce strict private label regulations for marketplace e-commerce firms in the country. 

*Disclaimer: This author was allotted shares in Zomato’s IPO.

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I cover several beats such as Crypto, Telecom, and OTT at MediaNama. I can be found loitering at my local theatre when I am off work consuming movies by the dozen.

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