Key Points
Zomato lays off 600 customer support staff hired last year
Layoffs linked to cost-cutting and AI automation push
Employees allege abrupt termination with minimal severance
Stock rises slightly despite BofA downgrade and slowing growth
The reported layoffs came as the company faces challenges in its core food delivery business and rising losses in its quick commerce subsidiary, Blinkit.
According to reports, the company had hired nearly 1,500 employees last year through its Zomato Associate Accelerator Program (ZAAP) to fill customer support roles.
However, in recent weeks, many of these employees have been let go without any prior notice or opportunity to improve their performance, the report added.
The employees who were fired received one month's salary as compensation, but the layoffs were reportedly based on issues like poor performance and punctuality.
Zomato's decision to reduce its customer support team is part of a broader strategy to cut costs, which includes using artificial intelligence (AI) to automate customer support functions, the report said.
This move is seen as an attempt to reduce operational expenses as the company faces slower growth and higher losses in its business.
When reached, the online food aggregator declined to comment as of now.
The layoffs have affected employees in cities like Gurugram and Hyderabad, and fears are growing among remaining staff about the security of their jobs, the report added.
Some of the affected employees took to social media to share their experiences, with one user mentioning that around 300 people were fired without warning.
Despite the layoffs, Zomato's stock saw a slight increase of 0.84 per cent during Tuesday's intra-day trading session by closing at Rs 203.20 apiece.
Meanwhile, last month, Bank of America (BofA) downgraded its ratings on Zomato, citing concerns over slowing growth in food delivery and increasing competition in quick commerce.
The brokerage revised Zomato's rating from 'buy' to 'neutral'. Along with the downgrade, BofA also slashed the target prices for the food aggregator.
Zomato's target price was reduced from Rs 300 to Rs 250. Despite these adjustments, analysts remain optimistic about the medium-term outlook for the firm.
