Zomato marks another profitable quarter with Rs 36 Cr PAT in Q2; Blinkit turns contribution margin positive

Food delivery company Zomato has witnessed yet another profitable quarter in FY24, with a profit after tax of Rs 36 crore in the July to September period.

The company said all its key business-to-consumer segments—food delivery, quick commerce, and going out—saw healthy growth in the second quarter, which helped it continue its profitability streak.

Revenue from operations in Q2 FY24 rose 71% to Rs 2,848 crore helped by a 47% year-over-year growth in gross order values (GOV) in the food delivery, going out (which comprises dining out and live events), and quick commerce segments, the firm told its shareholders in a filing on Friday.

Food delivery alone saw a 20% rise in GOV in the quarter, indicating a healthy recovery from the demand slowdown witnessed in the last two quarters of FY23.

However, Zomato's total expenses shot up 45% to Rs 3,039 crore from Rs 2,092 in the same period last year. Delivery and related charges rose 55% compared to last year.

Zomato Gold boosts food delivery

After witnessing a slowdown in demand in the last two quarters of FY23, Zomato said its food delivery vertical saw healthy growth in the second quarter with GOV rising 20% to Rs 7,980 crore compared to the same quarter last year.

Total revenue from operations earned from the segment rose 36% to Rs 1,546 crore from Rs 1,136 crore in the same quarter last year.

Zomato attributes the food delivery success to two main factors: an uptick in demand, which led to robust growth in order volumes, and the growing adoption of the Gold programme.

Zomato Gold—the company’s loyalty programme which offers free delivery above a minimum order value and additional discounts—now has 3.8 million members. This contribute close to 40% of GOV in the food delivery business, the company said. The programme had nearly 2 million sign-ups in June.

The company re-introduced the Gold loyalty programme in January as one of its efforts to achieve profitability. The move is said to have helped reclaim market share from rival Swiggy, according to HSBC.

Speaking about the current quarter’s estimates, the company noted that the ongoing festive season, coupled with the ICC Cricket World Cup, doesn’t necessarily guarantee higher sequential growth in the food delivery business.

“A lot of Indians also observe fasts during the Navratri festival and Shradh period (both of which are in Q3 FY24 this year due to a late Diwali), which tend to dampen order volumes during the quarter. The Cricket World Cup should result in additional order volumes, but we think that the demand uptick would be limited to a handful of match days and hence not very significant,” said Rakesh Ranjan, CEO of food delivery at Zomato.

Ranjan–earlier the head of Hyperpure–was appointed as the head of food delivery in the final quarter of FY23. Rinshul Chandra was made the COO of food delivery, while Rishi Arora was appointed as the head of Hyperpure.

Chief Financial Officer Akshant Goyal said Zomato expects quarter-on-quarter GOV growth to be moderate at a “high single digit which should translate to about 25-30%”.

The second quarter saw 18.4 million average monthly transacting customers, with a high monthly order frequency, which helped drive order growth. The company now expects monthly transacting customers to boost the majority of the growth going forward.

Elaborating on the economics of Gold order deliveries, Zomato admits that a Gold order is less profitable than a non-Gold order due to the impact of the benefits, including nearly-negligible delivery charges paid by the customer, higher delivery cost owing to longer average delivery distance, and the cost of no-delay guarantee benefit. 

However, the gap is starting to narrow, driven by efficiencies across the cost of the programme and pricing, according to the CFO.

“Eventually, we care more about growth in absolute contribution profit (rather than contribution margin). The future upside of higher ordering frequency (which is visible once a customer becomes a Gold member) is what we are investing behind in the present,” he noted.

The food and grocery delivery firm introduced a platform fee of Rs 2 - Rs 5 on every order in Q2 FY24 to make “the economics better and viable in the long run,” the company said.

Blinkit’s bumper quarter

Zomato’s grocery delivery business saw revenue from operations of Rs 505 crore in the second quarter, up from Rs 142 crore in the same period last year.

Quick commerce bounced back with a 29% quarter-on-quarter GOV growth following tepid growth in Q1 FY24, which was caused due to temporary disruptions in the business. Several delivery executives went on strike in April following some changes in their payout structure, resulting in the temporary closure of dark stores in certain parts of the country including the Delhi-NCR region.

GOV growth was largely driven by same-store sales growth as the company continued to focus on serving more customer needs and ensuring consistency of service levels, Zomato said.

Quick commerce business Blinkit also added 28 new stores during the quarter which took the overall store count to 411 stores as at the end of the quarter.

“We have also seen festivals driving much stronger growth for quick commerce as compared to food delivery. With major festivals like Navratri, Dussehra, Diwali etc. lined-up in the December quarter, we expect another high growth quarter from Blinkit,” Akshant said.

The quick commerce business turned contribution positive in the July-September period for the entire quarter for the first time ever, with margin (as a percentage of GOV) improving to 1.5% from -7.3% last year, the company noted. 

CEO Deepinder Goyal had said in August that Blinkit's GOV is very close to Zomato's GOV in some large cities and that it is likely to drive more value than Zomato in the next 10 years.

“We are now seeing profitable economics not just at a store level but also at a city level—where some of our cities are now operating at similar contribution per order as the food delivery business in those cities. So even from a potential profit pool perspective, we think quick commerce is a larger opportunity than food delivery,” the CEO said on Friday.

Zomato’s shares on Friday ended 9.62% higher to settle at Rs 117.90 apiece.

(The story was updated with more details.)