Zomato - Should you order?

Hey @SP2022 - here’s my take on the potential impact on obtaining the payment aggregator license.

Who is a Payments Aggregator?
Like the name suggests, they are aggregators. They connect online merchants with banks to process payments.

So, in our case – let’s say you order something from Blue Tokai Coffee on Zomato and you make the payment on the platform. Zomato will act as an aggregator, collect all the payments pertaining to Blue Tokai and then settle it in Blue Tokai’s account.

What’s the hassle with the license?
Until recently, PAs were not regulated by RBI. But due to some issues with customer onboarding, KYC etc, RBI decided to step in to decide who got this license. Existing players were allowed to operate as PAs and got the in-principle nod from RBI.

But, if you were a new player – you had to get this license before you could start your operations.

Becoming a PA lets you handle the funds for the merchants on your platforms and allows you to build financial products on top of it. PAs can offer early settlements to select merchants based on their business volumes, which is a form of credit. They can offer term loans as well by partnering with NBFCs and banks.

What’s in it for Zomato?
After obtaining this license, Zomato will serve as a Payments Aggregator and issuer of prepaid wallets (Zomato Pay). As per several sources on the net, they don’t want to become a standalone fintech player - but use this PA license to provide various offering within it’s ecosystem.

Zomato has a cash chest of > 11,000 CRORE and they could rotate that capital to make money.

Some services I am assuming it could provide would be:

  • Loans / Extended credit lines to restaurants / HyperPure clients
  • BNPL to Zomato users
  • Zomato powered credit card

Management commentary in the upcoming quarters should provide better insights on this to see just how BIG this opportunity could be, because Zomato could easily replace players like SIMPL and cross sell various financial services to it’s diverse set of partners / customers.


  1. licence: ETtech Explainer: The headlong rush for a payment aggregator licence - The Economic Times
  2. zomato online payment aggregator: Zomato, Stripe secure final RBI nod for online payment aggregator - The Economic Times

Thanks a lot. Looks like Zomato could be at the verge of unlocking multiple revenue streams

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I believe if they use the PA on all of their platforms, the PBT can increase by 50 bps to 100 bps. Credit card can’t be issued by PAs, you have to tie-up with a Bank or yourself have a banking license to issue credit cards in India, NBFCs can’t issue credit cards.
The same is with BNPL you have to tie-up with a bank or NBFC to do it.

Yes Amit, that is correct.

  • For credit cards, it could tie up with a bank to issue co-branded credit cards.
  • For BNPL / micro credit / loans to partners – it already had set up an NBFC called Zomato Financial Services Limited. Now, I am not aware if all the regulatory approvals to start lending money have been obtained or not. Management commentary on this should help us understand better.

Cannot comment on the PBT increase before we see what kind of traction it can actually build using the PA license.

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Sir will it not be risky for zomato to offer credit line/loans to restaurants as the failure rates of restaurants are high?

They have loads of data about the restaurants, and they will analyze all of this data and loan to worthy restaurants.

How many delivers a restaurant is delivering through Zomato, what items are these deliveries, cost of the items, margins on these items, are the deliveries increasing, are the high margin deliveries increasing, is there a seasonality element to the deliveries, are there any new restaurants opening up which are taking away some share of the existing restaurants which in turn has an impact on deliveries, who are ordering these deliveries, are they ordering from other restaurants too, and a few qualitative things can be added to, who owns these restaurants, what kind of name they have, do they have debt etc etc. Of course, this could fail and end as a cash burn.

Some thoughts, no investment, using their service.

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In case Zomato starts giving loans to restaurants, those loans will be secured by the cash that goes to them through Zomato, it will be holding that. But I believe its all about thinking too much from now. As of now they have majorly 3 business and we should try to calculate the earnings from them. I believe FY2025 Zomato will be ending between 2000 crores to 2500 crores of net profits and looking at the valuations that D-mart and Reliance retail is getting at this growth Zomato can also get a 100 multiple.

Disc. Invested and views may be biased.


Wow, do you think they can get to 2-2500 cr net profit by FY25! I can not imagine that but if that really happens, then yes PE 100 or more than that is very much possible.

I suppose today results will give us an idea.


Company issued ~1500 crores of ESOPs in last 1.5 months, they will have a drag of around 700 crores in next 4 quarters… I still feel 1500 to 1800 crores of PAT can be done by end of FY2025…


Money Control also concurs the same: Profits - ₹1603cr FY2025

Disc: Holding


Notes from Q3FY24 deck -

  • GOV across B2C businesses grew 47% YoY (13%QoQ) to 12886 Cr.
  • Food delivery GoV grew 27% YoY while Blinkit GoV grew 103%
  • Expect Food delivery GoV to grow 20%+ from here on. On Blinkit, Adjusted EBITDA breakeven may happen on or before Q1FY25
  • Demand environment in discretionary consumption was muted and hence Food delivery GoV growth of 27% was below Zomato’s expectations but still higher than most of restaurants in the space
  • Food delivery growth is there because it is still under served from supply standpoint. The monthly active user base has grown 20% YoY and also new restaurants have come under coverage
  • Zomato Gold is still in testing phase and is being used to acquire/re-acquire customers. Customers switch between loyalty programs of Swiggy and Zomato based on who is offering lower pricing
  • Despite drop in Zomato Gold pricing, contribution margin rose to 7.1%. This was because of increased ad-monetization which is leading to increase in ad revenue per order. Introduction of platform fee has also helped in margin improvement

  • Blinkit GoV growth of 103% YoY was driven by -
    • Robust uptick in demand due to festivals and occasions in quarter (77% increase in no. of orders)
    • Less stock outs and adequate delivery partner availability were ensured
    • While most of GoV growth was order volume led, it was also led by higher AoV as Blinkit has added higher ASP categories like electronics, festive needs, home decor etc. (15% increase in AoV)
    • Also added 40 net new stores this quarter, taking store count to 451 (~10% increase)
    • Despite increase in store count, average GoV per store per day grew 17% reflecting healthy SSSG growth
  • 90% of GoV in Blinkit comes from top 8 cities so the growth there has to be high to maintain high GoV growth. While Overall business GoV grew 28% QoQ, top 8 cities grew 26% QoQ
  • Close to 70% of stores in Blinkit are CM positive and 20% are above 5% CM and hence growing pool of contribution profit is making them to add new stores while maintaining expansion in CM margins

  • In Q4FY23 it used to take 5.8 months for a store to do 1000 orders per day, now it takes 2 months as there is stronger product market fit in the business. This has led to faster breakeven
  • Ad spends on Blinkit have grown 220% YoY vs GoV growth of 103%. This is because brands get higher RoI on ad spends on Blinkit and hence they are spending more here.


  • Restaurant additions on zomato’s platform has been a significant contributor to the 27% YoY growth in GOV.
  • Significant portion of new restaurants it added to the platform were cloud kitchens.

Most of the points from the Q3 concall + investor PPT are already covered above by @Simrat

I’ve captured a few cautionary points in addition to that below and also here

Few points to keep in mind going forward:

  • Zomato’s Q3 revenue was high on the back of a festive season in India and the Cricket World Cup, leading to higher sales and food ordering. Q4 is expected to be lower / flattish compared to Q3.
  • Fixed costs in the food delivery business increased due to server / tech infra — which will continue to be incurred going forward as well.
  • Going-Out business is in the build out phase resulting in increase in employee costs. It will take some time before such expenses will bear fruit.
  • Platform fees is unable to cover the cost of acquiring a Zomato Gold member. Pricing of Gold membership has been fluctuating which is a tactical decision to acquire / reacquire customers when membership renewal comes into the picture. The company is yet to reach a sustainable pricing model for it’s Gold membership.
  • No comment by the management on the risk of ONDC biting into margins / business share.

Food delivery – as a business model is not a high margins biz. There’s a lot of competition and expanding margins will be difficult. Given that, the current valuation looks extremely expensive.

Disclosure: Not invested. Tracking quarterly results, might buy if the stock drops 30-40% from here

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