Food delivery major Zomato on Tuesday reported a profit surge of 388.9 per cent during the fiscal second quarter at Rs 176 crore in comparison to Rs 36 crore recorded during the corresponding quarter of previous fiscal year. It recorded revenue from operations at Rs 4799 crore, up 68.5 per cent as against Rs 2848 crore during the same period of FY24. The company EBITDA stood at Rs 226 crore Vs EBITDA loss of Rs 47 crore YoY.
Zomato added 152 Blinkit stores during the quarter in review. While the food and grocery delivery firm said that most of its stores are profitable, Akshant Goyal, CFO, Zomato, maintained that addition of more new stores have been weighing on margins. “While most of our stores today are profitable with expanding margins, we are not seeing margin expansion at aggregate level at this moment because of the investments we are making towards scaling our infrastructure. This includes not just the stores that we are adding, but also the back-end large warehouses. For example, in Q2FY25, we added 152 net new stores and 7 warehouses. Since new stores and warehouses take a few months to ramp-up, they end up being margin dilutive in the short term,” he said.
Zomato has been in a fierce competition with Swiggy which recently filed papers for an initial public offering. To combat the rising competition, analysts at Elara Capital said, Blinkit has been adding more stores to its network, which has hit Zomato’s profitability. While the company added 152 Blinkit stores during Q2, it had added 113 stores during Q1, 75 stores in Q4FY24, and 40 stores in Q3FY24
In terms of GOV, Zomato said that GOV growth across the B2C businesses improved to 55 per cent YoY at Rs 17,670 crore in Q2FY25. On a like-for-like basis (excluding the impact of the acquisition of Paytm’s entertainment ticketing business) GOV growth was 53 per cent YoY. Meanwhile, food delivery GOV grew by 21 per cent on-year, quick commerce GOV grew 122 per cent, and Going-out GOV grew 171 per cent YoY. Further, Zomato’s B2B business Hyperpure’s revenue grew by 98 per cent.
Zomato’s cash balance reduced by Rs 1,726 crore as compared to the previous quarter on account of the deal consideration (of Rs 2,014 crore) for the acquisition of Paytm’s entertainment ticketing business.
The company’s board also approved Rs 8,500-crore fundraising via the issue of a qualified institutional placement (QIP), despite having a strong balance sheet. Deepinder Goyal, CEO of Zomato, said, “Zomato’s consolidated annualised Adjusted Revenue has grown 4x in a period of about three years – from Rs 4,640 crore at the time of our IPO in July 2021 to Rs 20,508 crore now (Q2FY25 annualised). In the same time period, our cash balance has reduced from ~Rs 14,400 crore to about Rs 10,800 crore (mainly on account of funding past quick commerce losses and some equity investments and acquisitions). While the business is now generating cash, we believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today.”
“We believe that capital by itself does not give anyone the right to win (and that service quality is the key determinant of success), but we want to ensure that we are on a level playing field with our competitors, who continue to raise additional capital,” he added while maintaining that the fund raise is meant to strengthen its balance sheet.