Blinkit expansion comes with steep costs for Zomato, hurts bottom line

Foodtech giant Zomato more than doubled its growth for its quick commerce arm, Blinkit, as it looks to increase categories and pincodes in the fiercely competitive space. 

Blinkit added 152 stores and seven warehouses during the quarter, especially in Tier II towns like Ajmer and Haridwar. During the quarter, its gross orders value doubled to Rs 6,132 crore. Gross order value per day per store fell to Rs 5 lakh from Rs 12 lakh a year ago. 

“While most of our stores today are profitable with expanding margins, we are not seeing margin expansion at an aggregate level at this moment because of the investments we are making towards scaling our infrastructure,” noted CFO Akshant Goyal in the shareholder letter. 

The Deepinder Goyal-led company pared its profit on a QaQ basis to Rs 176 crore, from Rs 253 crore it clocked in the previous quarter.

Its bottom line was hurt by growing total expenses, mainly driven by purchases of stock in-trade expenses, primarily on account of higher inventory costs due growing number of dark stores. 

Total expenses increased by 57.3%, mainly from an increase in expenses associated with stock in trade which more than doubled to Rs 1,369 crore. 

The Gurgaon-based company reported 68.5% higher operating revenue in Q2FY25 at Rs 4,799 crore, driven by the strength of its quick commerce and food delivery business. 

Fundraise plans 

The Board also approved its capital raise plans for up to Rs 8,500 crore through qualified institutional placements. It ended the quarter with Rs 10,813 crore in cash balance, while recording one major expense of Rs 2,104 crore for its acquisition of Paytm’s event ticketing business, Insider. 

“While the business is now generating cash (vis-a-vis a loss making business at the time of IPO), we believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today,” noted Co-Founder and CEO Deepinder Goyal in a shareholder letter. 

Stepping Out: District 

The competition in the quick commerce space is heating up with its biggest rival Swiggy eyeing to list on the domestic bourses before the end of the year. Zomato is keen to focus on its stepping-out unit as it looks to tap on synergies with cross-integration from its quick commerce and food delivery segments

It is currently planning to launch the  District app in the next four weeks. Zomato is focusing on migrating business from Zomato and Paytm platforms to the new District app which will offer customer booking options for movies, sports ticketing, live performances, shopping, and 'staycations'. 

Food delivery and HyperPure 

Its food delivery segment—which continues to be its largest vertical—witnessed lower growth as compared to the last two quarters at just a 21% rise vs a 27% YOY rise in Q1 and a 28% rise in Q4FY24. Food Delivery posted an adjusted revenue of Rs 2,340 crore in Q2 FY25 with an adjusted EBITDA of Rs 341 crore. 

During the quarter, its B2B unit HyperPure business nearly doubled itself to Rs 1,473 crore in revenue in the three months ended September 30, 2024. It managed to marginally narrow its losses in the segment from Rs 21 crore in adjusted EBITDA loss vs Rs 34 crore in the previous year.

Additionally, the company also acquired 600 shares of smart kitchen appliances maker Byondnxt for a total consideration of Rs 6,000. 

Shares of the company closed 3.44% lower at Rs 256.55 apiece on Tuesday. 

(The copy was updated with additional details)