Indian food delivery startup Zomato cuts 13% of workforce

Zomato, an India-headquartered food delivery startup, is cutting 13% of its workforce and enforcing a pay cut for remaining employees. The moves come as it looks to reduce costs and survive the coronavirus crisis that has made many cautious about ordering food online.

The 11-year-old firm did not disclose the exact number of people it was letting go, but the number is above 500. A Zomato spokesperson told TechCrunch that the startup employs about 4,000 people and the layoff impacts its workforce globally. (Zomato offers its food discovery and review service in dozens of markets.)

Zomato, which laid off about 540 employees from its customer team in September last year, said it would provide those affected with health coverage and half of their salaries for six months or until they find a job elsewhere — whichever happens first. Those employees who were hired by manpower agencies and were not on the payroll will be provided with two months of severance, the startup said.

Deepinder Goyal, co-founder and chief executive of the Gurgaon-based firm, said Zomato has been “severely affected by the COVID lockdowns.” India issued a nationwide lockdown in late March, which is still in place, to prevent the outbreak of the infectious disease.

“A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months. What actually happens, for better or worse, is anybody’s guess,” he wrote in a blog post.

Goyal also proposed a salary cut across the company. “Starting June, I am proposing a temporary reduction in pay for the entire organisation. Lower cuts are being proposed for people with lower salaries, and higher cuts (up to 50%) for people with higher salaries,” he said, adding that several people had already volunteered to forego their entire salary for six months.

The company is also offering employees the ability to work from home permanently even after the lockdown order is lifted. “We need to make sure we preserve as much cash as possible to weather the storm if the business environment gets worse or continues to be the same for the rest of the year or more,” said Goyal.

Today’s announcement follows a similar move by Swiggy, India’s largest food delivery startup, which cut about 1,000 jobs last month. Both the startups are currently processing fewer than a million orders on their platforms, down from nearly 3 million they were handling before the outbreak as people cut their exposure to the world.

To make up for the loss, both of them have also expanded their businesses. Zomato, which recently started to deliver grocery items, said it is now serving this category in 185 cities in India and plans to launch this offering in UAE and Lebanon.

Zomato, which raised $150 million from Ant Financial in January, has been in talks to raise an additional $350 million. In an earlier email exchange with TechCrunch, Goyal said he expected the round to close by mid-May. Uber sold its Indian food delivery business to Zomato earlier this year.

Several industries, especially travel and hospitality, have been severely hit as people follow the New Delhi stay-at-home order. Oyo, a startup valued at $10 billion, said last month it was placing thousands of employees on leave and furloughs for up to three months in the U.S. and several other markets as its revenue dropped by more than 60% in recent months.

Ixigo, a 13-year-old travel and hotel booking service, said late April it was cutting the salary of its entire staff. MakeMyTrip, another travel and stay booking service, announced in the same month that it was also cutting the salary of its top management level across the company. This week, MakeMyTrip announced it was entering the food delivery business.