Zomato profit zooms to ₹176 cr; to raise ₹8,500 cr via QIP

Zomato reported a 389% year-on-year increase in consolidated net profit, reaching ₹176 crore in the second quarter, up from ₹36 crore a year ago. The growth was driven by strong performance in its quick commerce arm Blinkit and restaurant supplies business Hyperpure. However, profit missed market expectations as expansion efforts, including BlinkIt's infrastructure investments, impacted margins.

The company’s consolidated revenue from operations rose 68% year-on-year to ₹4,799 crore in the second quarter, up from ₹2,848 crore a year ago. Total expenses increased by 57% to ₹4,783 crore, compared to ₹3,039 crore in the same period last year. The company's bottom line was supported by improved food delivery margins and its quick commerce business nearing break-even.

Zomato's gross order value (GOV) for its B2C businesses grew 55% year-on-year to ₹17,670 crore in Q2 FY25. Excluding the acquisition of Paytm's entertainment ticketing business, GOV growth was 53%. Adjusted EBITDA surged 137% year-on-year to ₹341 crore, with food delivery margins improving to 3.5%, up from 2.6% a year ago. However, adjusted EBITDA for the segment recorded a loss of ₹8 crore, down from ₹124 crore in losses a year earlier, but higher than ₹3 crore in losses in the previous quarter. Overall, adjusted EBITDA for the quarter rose to ₹331 crore, up from ₹41 crore last year.

Segment-wise, the company’s food ordering and delivery business grew 30% from ₹1,546 crore to ₹2,012 crore, while the Hyperpure B2B business nearly doubled its revenue from ₹745 crore to ₹1,473 crore.

The "Going-out" segment, which includes dining-out and entertainment ticketing, more than doubled its revenue from ₹49 crore to ₹154 crore. The dining-out business performed strongly, with revenues rising 214% year-on-year and GOV increasing by 171% year-on-year for July-September 2024.

Meanwhile, Zomato's quick commerce business, BlinkIt, showed strong growth, with revenue increasing from ₹505 crore to ₹1,156 crore, almost 120% uptick. Acquired in 2022, erstwhile Grofers, BlinkIt's dark store count reached 791 by the end of the quarter, and the average order value increased to ₹92.9, up from ₹78.8 in the previous quarter. Zomato reportedly plans to grow its store count to 2,000 by 2026.

Zomato shares fell over 4% to close at ₹256.35 on the NSE on Tuesday after failing to meet market expectations.

Meanwhile, the company board also approved a proposal to raise ₹8,500 crore through a qualified institutional placement (QIP) of shares to strengthen its cash reserves amid growing competition from rivals. The company aims to bolster its balance sheet, stating that while it is now generating cash, unlike during its IPO, enhancing its cash balance is crucial in the current competitive landscape.

Zomato's cash balance fell to ₹10,800 crore in the September quarter from ₹14,400 crore at its IPO in 2021, primarily due to funding quick-commerce losses and acquisitions, including Paytm’s events ticketing business for ₹2,014 crore. The company clarified that the funds raised will not be used for minority investments or acquisitions. Zomato founder and CEO Deepinder Goyal emphasised that maintaining service quality is key to success. Still, they want to ensure a level playing field with competitors raising additional capital.

This comes as rival Swiggy prepares for more than $1 billion public listing in the coming week, aiming for a valuation of around $15 billion. In comparison, Zepto has raised over $1 billion from private investors in the last six months and is expanding its quick grocery delivery footprint. Both companies are set for initial share sales, with Swiggy having filed for an IPO and Zepto planning a stock market debut next year. Competition in India's online food and grocery delivery sector remains fierce.