In August, there was buzz that Ola will open its own portable/mobile dark stores.
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Good initiative: Blinkit launches 10-minute ambulance service in Gurgaon
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Is Zomato an Innovative Company?
Zomatoâs CEO, Deepinder Goyal, states that the companyâs culture is to embrace disruption and constantly innovate. Zomatoâs mantra is, How do we disrupt our own businesses?
But as retail investors, how can we confidently say, âYes, Zomato seems to be an innovatorâ?
Innovation is the process of introducing new ideas, methods, products, or services that are novel and useful. When any company claims, We are innovators, it must be reflected in all its actions. Innovation is not confined to a laboratory; it is a mindset.
From the perspective of a public market investor, do we see any signals that Zomato is doing things differently? Yes, here are a few observations:
- They invite and conduct conference calls differently.
They pre-register participants and engage only marquee investors during the calls. - Their shareholder letters are novel and useful.
- Their QIP letter says - The meeting of the Committee commenced at 11:50 p.m. and concluded at 11:58 p.m. They concluded meet in 8 minutes of raising Rs. 8500 cr. One can imaging how timely and accurately those meeting may have conducted.
Nothing to buy or sell hereâjust sharing my thoughts, as the Indian market rarely sees such companies or entrepreneurs.
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Accumulated the stock in recent correction, average 252âŚ. Am confident that Zomato will maintain and even strengthen its leading position amidst this rising competitive landscape.
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Zomato is simply shifting consumer surplus to producer surplus. Once the equilibrium is reached, growth will stagnate, and all inflated ratios currently justified by so-called growth will collapse to normal levels. Itâs absurd that Zomato, a mere trader selling products from brands like Hindustan Unilever (HUL), is valued higher than HUL itselfâa manufacturer with decades of proven value. How long can this illusion last?
The market is blindly chasing growth while ignoring fundamental value. If Zomato falls, it could take Indiaâs fragile startup ecosystem down with it. I may be wrong, and I sincerely hope I will be wrong because the consequences of a collapse would be far-reaching.
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I feel the same.
Majority of these start-ups are trading at astronomical valuations. Just 1 earning disappointment is enough for the valuation to plummet.
Donât agree with your comment of âmere traderâ, if that was the case why so many big players (Amazon, Flipkart, Relince, Tata) attempted to capture QC and failed?
Zomato is a fantastic company and an innovator who is solving last mile issue at so much ease, capitalising on consumer behavior and growing sales/profits on steroids.
Mega thesis - Market leader in serving largest and fastest growing middle class population in the world, while labour cost is lowest in the world. Covid was a silverlining when people even in T2 cities developed habit of home delivery, wfh will remain in T1 and hence QC/food delivery trend will keep growing and growing.
Biggest moat for Zomato is itâs streetsmart management having proven track record of growing and capitalising on this mega trend and made food delivery and QC a household habit which is so so difficult to break!!! Zomato is now way ahead of Swiggy, clearly a force to reckon as this mega demand trend is secular and itâs about time for them to monetise.
My friend, itâs not so much about product, but more about service and their service leadership is probably comparable to HUL in product segment.
In terms of valuation, their EBITDA in a years time wonât be too different than dmart while itâs EV is below dmart.
Disclosure: Invested and biased
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Zomatoâs valuations are obviously stretched but calling it a âtraderâ is short sighted imo. Its a consumer tech company, and I firmly believe itâs going to capture a non trivial percentage of spending from the top 10-20 % Indians in the coming years. You can see it in their evolution : food delivery, quick commerce, expanding qc to traditionally e commerce products, district and now their private food delivery labels. Nothing is stopping them from launching their own labels on blinkit for everyday items, something which zepto is already doing.
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kirana stores owners are filling cases doesnât mean it is also a kirana store lmaoo
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India has yet to experience a proper bear market in the last five years, but Zomato has already shown its vulnerabilities. It only reports top-line growth, with no real progress on the bottom lineâcalling accounting tricks âgrowthâ doesnât fool anyone. As a balance sheet investor, the key question is whether this growth is sustainable. Sure, thereâs top-line expansion, but what about the valuation? When Zomato was listed, it pitched a story of cloud kitchens disrupting the restaurant business, but when the 2022 mild bear market hit, the stock tanked 65% in just six months. Now, theyâre spinning the Blinkit growth story.
The truth is, in Zomatoâs case, you can pile up all the good stories you want, but it only takes one bad story to bring the whole thing crashing down.
The truth is, Zomato can only increase profitability by raising pricesânot by cutting costs, since it canât significantly reduce the buying price. Thatâs why I call it a traderâs game. The bigger problem is, if Zomato keeps hiking prices, whoâs going to buy? Consumers are all about discounts, and without them, Zomato has nothing to offer. No discounts, no money.
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There is already a bottom line, the company is profitable 5 percent margin from 2% in past quaters and 3 percent ttm you can see for yourself on the balance sheet they are a software service not a trader plus they have multiple revenue streams be it blinkit or food delivery ( market leader in both) and margin is most likely to sustain as it is a convenience based margin ( someone other than you brings your order while you just have to select food from a multitudes of restaurants and pay by clicking on your phone - viola margin) valuation is chased by growth not the other way around. Only pain point is other players seizing market share from zomato but it already is way ahead first mover advantage to swiggy and zomato good night 
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The current fall is market making lower lows as seen in multitude of stocks with no other legit explanation for the fall profit booking
Think about another lockdown coming down the way lets say HMPV where will you get your supplies from as far as I remember food deliveries were going on during covid
Indian tech based solution companies are traders while real growth is in USA apple meta tesla Am i right ? Who knows just wait for q3 results rather than speculation
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Zomato might have the strongest balance sheet. Close to âš21000 cr in cash + investments (adding 8500 cr QIP money as well) and zero debt on its book. Apart from reliance, Zomato can virtually kill the competition if it starts doing the same tricks like Zepto of deep discounts and cashbacks. Zomato/blinkit does not play like it and still has been able to be a leader among the group and profitable!. Plus the TAM for quick commerce is so big in India if you think. They are operational in what 35-40 cities and town in India whereas total cities + towns are > 4000. it really is just bet on the management. Smart people will win the race in a profitable way. Just my opinion, no recommendation.
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Amazon has started 10 minute deliveries in Bengaluru.
Free delivery for prime customers with no handling fees, and 5% cashback on ICICI amazon card. Itâs going to be a major setback for Blinkit.
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ZOMATO: Q3 CONS NET PROFIT 590M RUPEES VS 1.4B (YOY), Cons PAT falls 57% YoY to Rs 59 crore, revenue surges 64%
- Food Delivery GOV growth slowed due to weak consumer sentiment
- Blinkit losses to continue in the near term as Co continues to invest
- Heightened Q comm competition has led to a temporary pause in margin expansion
Q3 KEY INTERNALS
- B2C GOV growth at 57%, 20206 Cr vs
- Food delivery GOV grew 17% YoY; +2% QoQ
- Quick commerce GOV grew 120% YoY; +27% QoQ
- Blinkit EBITDA Loss at 103 Cr vs loss of 89 Cr YoY, 8 Cr QoQ
CO SAYS:
- Will get to 2000 dark stores by Dec 2025 vs earlier guidance of Dec 2026
- 216 Blinkit stores added in Q3 vs 152 in Q2FY25
- Food Delivery EBITDA Margins will reach sustain around 5% in the next few quarters
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I have personally stopped using zomato and blinkit much because I have both the Amazon Pay ICICI CC (5% discount on amazon) and Swiggy HDFC CC (10% discount on Swiggy)
Zomato needs to do a similar move if they want to stay competitive.
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But arenât Amazon India and Swiggy bleeding money?
Wait for Swiggyâs price action following their quarterâs results, as they will likely be compelled to focus on improving profitability. In doing so, Zomato may gain a competitive edge. Both will are expected to increase platform fees and reduce discounts to enhance their margins.
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Q3 2025 Notes:
a. Food Delivery:
i. Sales 2413crs (Y-o-Y growth of 17%, Q-o-Q growth of 3%).
ii. Adj. EBITDA 423crs (y-o-y up 68%, q-o-q up 24%)
iii. GOV 9913crs (y-o-y up 2%, q-o-q up 17%)
iv. Take Rate 24.34% (y-o-y 24.30%, q-o-q 24.15% absolute numbers)
v. Average monthly transacting customer 20.5mn (Y-o-Y growth of 9%, Q-o-Q degrowth of 1%).
o Good: EBITDA has done very well, this has to be mostly attributable to the higher platform handling fees, cost optimization and some bit from reduction of free delivery distance. Company has guided for an Adj. EBITDA margin of >5% in the coming few quarters.
o Bad: Number of active monthly customers have declined for the first time (correct me if Iâm wrong). Growth has fallen below the 20% mark, company attributes this to a slowdown in demand, but remains confident of 20%+ growth in coming future.
o 10min delivery model: I felt that the company is doing a pilot with Blinkit Bistro and was very vary of guiding/shedding light on the plans. My personal guess is that they want to be sure of the business model before they commit something. Zomato is trying to solve this by offering <15mins delivery by curating menu items and providing a dedicate fleet. Blinkit Bistro is available in only select locations. Company believes that to be successful in this line of business will not be very easy. They will have to solve for the following:
ď§ Adequate density of delivery partners.
ď§ Dense network of partner restaurants.
ď§ Reduced prep time.
b. Blinkit:
i. Sales 1399crs (Y-o-Y growth of 117%, Q-o-Q growth of 21%).
ii. Adj. EBITDA -103crs (y-o-y down 16%, q-o-q down 11.87x)
iii. GOV 7798crs (y-o-y up 2%, q-o-q up 17%)
iv. Take Rate 17.94% (y-o-y 18.18%, q-o-q 18.85% absolute numbers)
Blinkit
| Blinkit | |||||
|---|---|---|---|---|---|
| Q3â24 | Q4â24 | Q1â2025 | Q2â2025 | Q3â2025 | |
| Sales | 644 | 769 | 942 | 1156 | 1399 |
| EBITDA | -89 | -37 | -3 | -8 | -103 |
| GOV | 3542 | 4027 | 4923 | 6132 | 7798 |
| TakeRate | 18.18% | 19.10% | 19.13% | 18.85% | 17.94% |
| Avg cust count (in 'mn) | 5.4 | 6.4 | 7.6 | 8.9 | 10.6 |
| Orders (inâ mn) | 55.8 | 65.3 | 78.8 | 92.9 | 110.3 |
| GOV/Day/ Store (inâ000) | 889 | 920 | 956 | 981 | 970 |
| Total Stores | 451 | 526 | 639 | 791 | 1007 |
| Store Additions | 75 | 113 | 152 | 216 | |
| AOV | 635 | 617 | 625 | 660 | 707 |
o Company has gone very aggressive with opening new stores. Company has almost doubled the store count in last 9months. This has lead to a huge cost on the capex front. Leading to much higher loss on EBITDA front.
o 80% of the new store additions are in the top 8 cities. 20% are in the remaining cities. Of the 80% of the new stores 50% are being opened in high demand location to full up the gaps or ease the load on current stores and drive down the servicing time. 30% are in the unserved locations of the top 8 cities. This 30% store additions will act as seeds for future growth.
o Company has advanced the 2000 dark stores target to December 2025 from earlier guided December 2026. I believe that since the competition intensity is increasing the company is planning to expand its footprint.
o Company mentioned that they have been able to gain market share even in the markets where the competition had a head start. They are not offering discounts on the q-com platform as they believe in investing to improve services.
o GOV per store per day has gone up 9% despite more than doubling of the store count. I find this to be very impressive.
o Higher AOV is attributable to higher share of electronics.
o 52% of GOV is coming from 30% of the stores. Remaining 70% stores contribute 48% of sales. Only 30% of the stores are contribution positive as of Decâ24.
o Company expects the current stores to mature by the end of the current calendar year. They expect the picture tobe clearer by the time they reach 1600-1700 stores by Q2â2025.
o Company expect the contribution margins to be raise above 5% in 2-3years time from the current levels of 3%.
o Increased competition is increasing customer awareness and the CAC to bring in more customers has remained very attractive. Hence, the company is focusing on increasing the customer count.
o Marketing expenses will continue to remain elevated as the company keeps adding newer stores.
o Company has also pulled back on delivery charges to maintain/gain market share.
o Company will share more data points from the next quarter with should help us to get better picture of the company performance.
Iâve only shared my notes on the two verticals as i believe that other verticals are not material at this stage.
I feel that the next 6 months will remain challenging interms of cashflow but Iâm not worried as the company has very good cash balance and even in this qtr the company has remained cash positive.
Iâm holding the stock for the long term. Zomato is the most efficient company inthe segment and they have been able to build a large scale business much more efficiently than the competition.
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