Following the dissolution of its various global subsidiaries in 2023, the restructuring effort continues for the food tech giant Zomato, even as we enter 2024.
In a filing on Thursday (January 4), the company announced that Zomato Vietnam Company Limited (ZVCL), a subsidiary of Zomato Limited located in Vietnam, has initiated the process of liquidation.
In the filing, Zomato highlighted that ZVCL made no contribution to the overall turnover of the company.
“ZVCL is not a material subsidiary of the company, and the dissolution of ZVCL will not affect the turnover/revenue of the company,” Zomato said.
The net worth of ZVCL amounted to INR 36 Lakh.
The development came a day after the listed food tech startup initiated the liquidation process for its Polish step-down subsidiary, Gastronauci SP. Z.O.O., with the subsidiary’s contribution to the company’s total turnover also being zero.
Zomato shares maintain an upward trajectory, concluding the day’s trading with a nearly 2% gain, closing at INR 129.95 on the BSE.
Zomato’s Profitability Milestones in Q1 and Q2 FY24:
In its pursuit of profitability, Zomato streamlined various facets of its operations last year, discontinuing business operations in several countries such as Indonesia, Jordan, Czech Republic, and Slovakia.
In Q1 FY24, Zomato attained profitability and sustained a trend of rising profits into the subsequent quarter, Q2.
Conversely, Zomato is currently enhancing its monetization strategies and has raised the platform fee for each order from an initial range of INR 2-INR 3 to INR 4.
Continue Exploring: Zomato raises platform fee to INR 4 per order in major cities
However, the company is currently entangled in new tax issues. Tax authorities have issued a notice of INR 4.2 Cr to the startup for alleged underpayment of goods and services tax (GST).
Continue Exploring: Fresh trouble for Zomato as tax authorities seek INR 4.2 Crore in unpaid GST
Last month, Zomato received a show cause notice amounting to INR 401.7 Cr from the Directorate General of GST Intelligence, Pune Zonal Unit, regarding unpaid taxes on delivery charges collected from customers.
Continue Exploring: Zomato receives INR 401.7 Crore show cause notice from GST authority over unpaid taxes
In light of the latest challenges faced by the company, JM Financial mentioned in a recent research report that if the conclusive order turns unfavorable for Zomato, the platform would transfer the GST burden directly to the end customers.
Moreover, Zomato holds a cash balance of INR 11,800 Cr, sufficient to offset the repercussions of any unfavorable rulings related to past dues, as noted by the brokerage.
“However, the key thing to watch out will be how long the case drags and the remedial measures that the company takes to mitigate any future tax liability demand,” it added.
Last year, Zomato shares witnessed a gain of over 100%, and many analysts now consider it a “multi-bagger stock.”
