If you search the shareholder letter for competition/competitive you’ll see those words pop up 15 times. This industry used to have fewer players, but now every big-name organization with deep pockets is jumping in. So, don’t expect the same kind of returns you got before—it’s a whole new game now.
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yes nothing ever matters the pe does not matter,the roe,roce cash flow nothing,the only thing that matters is what the speculator believes right?.On a serious note,
- Stock going from 40 to 240 is good, but price appreciations does not means it is fundamentaly good, meme stocks and bubbles also go up does not mean they have justified intrinsic value.Eternal run up shows momentum and big shareholder number shows speculative activities, the market cap at present means it has already discounted future profits and cash flow.
2.Forward PE is complete gueswork same as future cash flow,now nothing wrong in calculating that, but often built on management guidance or optimistic projections even forward PE in this case would be extreme,you do need to share what numbers you are expecting as i can be wrong big time.Plus there is genuinely no high margin business model like AWS visible.
3] I agree with margins improvement part but they have improved in a very modest way which is nice. the core food delivery secton is maturing and may face growth stagnation without future good discounts.
and as we all know blinkit still is negative ebitda and burns cash
4.about the private label thing,its still theoretical. Owning inventory increases working capital risk.and with ur 10% margin on items will not offset loses on core operations unless massive volumes are achieved,assuming they will achieve it as u said its a big big grocery market(TAM), the stock is already trading at that future value so the upsiode gets limited and downside is big{ talkijng about present situation}.
- and the TAM is huge and growth is also 4-5% but it also comes with hyper competetive pplayers with much deeper pockets.
- and last things last yes optimist do make money but you missed the catch of margin of safety, many optimist also lose money in such stocks,investing is also about combining vision with real numbers(quantitative). And yes money can be made in sustainable profits and defensible moats, not just stories.
but yes, Zomato is the next Amazon without profits,fcf and AWS riding on grocery delivery as its golden goose.for sure 10% margin on my shampoo and lays delivery will fund the multi trillion dollar empire.and yes the stock price went up, good thing buffet packed it up as valuation works on vibes and verticals,who needs profits when you got a chart breakout with 28 lakh shareholders manifesting optimism. with the number of shareholders its not even a stock anymore, its just a group therapy session with chart.
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I entered this stock around Rs 45 and kept adding till it became my top 3 holding with average price 80-90. What I want to share is the thought process along the way.
The rationale initially was I saw huge opportunity in Food Delivery Growth with potential to grow in next cities. India has a huge population and some are lazy to cook or go out and eat. Home delivery addresses that segment in a big way.
Then Blinkit happened. While people debated Competition, for me they were snatching business from Kirana stores, so competition didn’t matter. Hence it was still a buy.
I kept adding as they started charging platform fees at Rs 3 and started increasing every quarter. I was sure upto Rs 10, customers won’t mind. This would boost profits.
One thing I was not sure of was economics of scale in FD, till it happened with me. I ordered two different items from different restaurants but the delivery boy was same. So they did have a model to club orders.
The bigger boys like Amazon made noise but didn’t jump in fully. So the positivity continued.
Then came what I closely follow. I look for management commentary where instead of explaining why they are doing well, they start sharing excuses which appears legitimate. That is my trigger to start selling.
Once they started giving explanations like Blinkit profitability will get pushed back due to cost of store additions, this was the time to start reducing. Also factoring in was many big players are now actually coming in which will increase discounts because there is hardly any brand loyalty in this space.
I have sold about a third of my holdings. My view is I am unlikely to double this stock even in a 2-3 year period.
Hope the rationale of Zomato journey is useful to some.
Disclosure - Invested. This is not a recommendation to either buy or sell.
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I agree with some of your points. However I still feel there is ample growth left. They have set a dark store target of 2000 stores for this year and my assumption is by next year the dark store consolidation (industry consolidation) might happen among all the players since even flipkart is also opening 800 stores, zepto is opening some 1000 and swiggy also a similar number this year. Hence we see negative ebitda in quick commerce. This is not a story, but the truth of the overall business. There are quick commerce businesses like instacart globally who have made sustainable profits based on advertising income alone. My assumption is based on recent history that discounts don’t work and other ecommerce players who had 10 years to crack the traditional ecommerce model and make it profitable could’nt do so because they are unable to own inventory due to India’s FDI rules. So traditional players might have an edge and might become profitable rather than foreign players. So combined with high volumes and close to 4-5% margins we can see good profits flowing to bottom line. This is my study, won’t say I am 100 percent correct, I agree with some of your points as well, but I feel that zomato might do well in the future.
Discl: Invested.
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yeah,i agree to disagree, as my point is not even about zomato being a good or bad company its about making returns out of my investments,i mean why do a person invest?
to make money simply, but what if the investment is already priced in for its future earnings,all im saying is that the margin of safety is bad considering its trading at 2lac cr+ mcap with super high PE. and there could be time correction. and at the end of the day investing is all about probabilities i.e anything can happen. 
plus another point on instacart, from what i understood its not same as blinkit or zepto and the operating enviroment is different (at present,ofc it will change with time) they charge good amount for delivery and subscription,most of the people in india are a bit price sensitive so even a bit change in price will make general people shift towards another platform.plus instacart is available at 1laccr+ mcap with 28k cr of revenue and 7kcr of ebitda,with a PE of around 30,i get the point of bigger market here in india but better not forget the price sensetive point,so yeah it would be interesting to watch how this unfolds.
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Sometime back Blinkit had almost no competition, that is no longer the case now. Even as a Zomato shareholder, I ended up buying on Flipkart Minutes, Bigbasket and Zepto recently due to better pricing and discounts. In short, from a business with an edge, its now getting reduced to a commodity business with multiple players. Sales Growth will continue , however its tough to do profitable growth. In conference call someone asked a question “How many players will survive in quick commerce”, Management reply “We ourselves are not sure whether we will survive or not…”.. that may have been in lighter vein as that was put that way, but that seemed to me truth coming out of their mouth!!! so the very next day I completely exited. While future will tell whether it was right or wrong, however I have better sleep now as Zomato was a big holding for me. I moved to more surer stories.
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The company that controls the ecosystem always wins. Rapido, already a leader in ride services, can leverage its network to reduce delivery costs—a key component in food delivery. Swiggy also has its Genie network, but the question is: what will Zomato do now? The industry is becoming ultra-competitive.
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There’s almost certainly no way that Rapido is going to break even at ₹25 per delivery.
If you look at the financials of Swiggy and Zomato (whose food delivery business is mature), you can see their operating profit margins are in the region of 10-20%.
So of a ₹450 order of McChicken, about ₹360-405 go in operating costs (payment to restaurant, delivery guys, ancillary costs such as customer support, rider training, management etc).
For Rapido to achieve similar operating margins, they would need have their operating costs at ₹187-210. So assuming ₹199 goes to the restaurant, they have only ₹10 to spend on delivery and other aforementioned costs.
Most likely Rapido is operating at a loss to try and break into a duopoly that is dominated by two players.
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Yeah rapido did the same thing with their cab service. And initially the difference in price on rapido vs uber was pretty big but it has decreased over time. I expect the same to happen here.
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In food delivery, the biggest cost is paying the delivery partner. Zomato spends around ₹60–₹70 per order on this. But if a company like Rapido can do the same job for just ₹40-₹50, it can give more discounts to attract customers and still make similar profits. This shows that even a small change in delivery cost can completely wipe out the profits from each order. That’s how fragile the business model is in such a competitive market.
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A look at the top investors in Rapido. Surprise, surprise Swiggy is the second largest investor in Rapido
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Choice of Rs 199 appears mischievous as at Rs 200 delivery charge’s would become zero and the entire dynamics would change.
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The era of free delivery is over.
At the outlet, the same product costs ₹199. On Rapido, it’s ₹234.
Yet, Zomato’s price remains higher than both.
Why? Because Zomato is targeting a specific segment—customers who cannot visit the outlet themselves or wait an hour for delivery.
In effect, the Total Addressable Market (TAM) includes corporate Indians with high-paying jobs who willingly spend ₹300 on a ₹200 meal—not just for the food, but for convenience, speed, and reliability.
Zomato is no longer aiming to serve every Indian. It’s now focused on monetizing the top 0.6% of the population who can afford these privileges—and are willing to pay for them.
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think of it this way. Rapido is able to offer this only because they are burning money. they might be able to impact the mkt in the shortrun but what will happen when they have tobe disciplined with the money.
Its not that zomato, despite all the scale is making 20-30% ebitda margins on food delivery. best comparison would be Zepto, they also created a stir by burning money. We all can see what happened.
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What rapido is doing doesn’t seem sustainable…they will probably burn money for the next year or so…after which they will also have to increase rates…what i feel is that the player with the most strong balance sheet will emerge victorious at the end… zomato has close to ~20000 cr on it’s balance sheet…I think they are well positioned to fight any competition especially one that is burning cash to survive.
Agreed. Zomato/Swiggy, and other e-commerce platforms, all follow a similar model. They are unlikely to run out of money, as they will likely secure further funding. The same was said about Zomato/Zepto initially. Eventually, Zomato/Swiggy will likely lower their inflated prices, and this competition will reduce their current high valuations. This will impact their margins as well. Indians do not mind multiple apps on their mobiles and will turn to Rapido if they find better deals there. Rapido just need to work on their UI, which I am sure they will. A 400+ PE ratio is not sustainable in the long run despite all the scale. Right now Zomato is the best bet for short term thats why its commanding high valuations.
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₹20,000 crore cash?, more like ₹20,000 crore investor funded hallucination. zomato didn’t earn that they raised it during the peak of IPO euphoria when burning money was called ‘disruption’ and buying Blinkit looked like strategy instead of charity. its called venture-backed survival, not a fortress balance sheet.lol
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Free dollar printing will eventually end. Where will the funding come from? QCommerce firms will be in deep trouble.
This has been the argument for the past three years yet no funding has been stopped.
Republicans came to power in 2025. De-dollarisation is happening in 2025. Your argument of funding not stopping in past 3 years is not valid anymore.
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