Zomato outlines Blinkit's store expansion plans as quick commerce takes off

Zomato’s bet on its purchase of Blinkit seems to have paid off as the quick delivery platform achieved a positive EBITDA level in the March quarter. However, the Hyperpure segment sees muted growth even as EBITDA margins improve.

Monday May 13, 2024 , 4 min Read

Blinkit's strong performance has prompted its parent Zomato to double down on its quick commerce business. The Deepinder Goyal-led company plans to increase the number of its quick commerce stores to 1,000 by March 2025.

In the earnings call for Q4 FY24, the Deepinder Goyal-led company noted that it has added 75 net new stores for Blinkit, taking its total store count to 526 during the same period. In the first quarter of FY25, Blinkit expects to add another 100 stores with a focus on the top eight cities, including Delhi-NCR, Bengaluru, Mumbai, Hyderabad, Chennai, Pune, Kolkata, and Ahmedabad.

The company reported a 97% year-on-year rise in gross order value (GOV) for Blinkit during the three months ended March 31, 2024. Zomato had 6.9 million average monthly transacting customers on Blinkit compared with 3.4 million a year ago, with a 49% rise in total orders placed.

The number of monthly transacting users (MTUs) on Blinkit may cross Zomato’s MTU in the near future, as per Zomato's financial chief Akshant Goyal. Although, he didn't give an exact timeline in the call.

Over the next few quarters, Blinkit's objective is to attain a level of market penetration in Bengaluru, Mumbai, and Hyderabad similar to that in Delhi NCR—both in terms of store footprint and GOV. The company expects the strategy to bear a fourfold increase in the GOV.

Although adding more stores in its most active cities is bound to bring down the throughput of orders in existing stores in the short term, the management is confident that a slump is well worth considering the improved customer experience. The company also wants to add more products to sell through its quick commerce business.

ESOPs

The foodtech unicorn noted a significant reduction in expenses as a percentage of revenue: from 29% in FY22 to 12% in FY24. It undertook an employee stock ownership plan (ESOP) solution before its listing and it still has “a large part of, or at least some meaningful portion of that ESOP pool with us today to be granted to employees,” said Akshant Goyal.

The company also announced it is proposing to create an additional ESOP pool of 18.26 crore employee stock options—about 2% of its outstanding share capital on a fully diluted basis. The company expects the new ESOP pool to be sufficient for the next five years and is expected to primarily benefit Blinkit’s senior management and employees.

Hyperpure: Not focusing on breakeven

Zomato highlighted that it is already seeing diminishing growth in its Hyperpure business, a B2B platform for kitchen supplies, as revenue growth in the segment has fallen from 146% YoY in Q4 FY23 to 99% YoY in Q4 FY24.

However, the management anticipates a downward trend in the unit’s growth as it scales up, even though it is expected to generate healthy revenue. EBITDA margins for Hyperpure have shown improvement, shifting from negative 9% in the fourth quarter of last fiscal year to negative 2% currently. Despite ongoing margin improvements, the primary focus remains on encouraging further growth at this point.

Advertising: inflows and outflows

Zomato is anticipating a rise in advertising revenue from Blinkit, however, the company can't offer exact projections. However, it's evident that advertising has significantly boosted economics thus far and is likely to remain a key driver in the foreseeable future.

Zomato's quick commerce vertical faces stiff competition from its rivals, SoftBank-backed Swiggy's Instamartand Zepto.

The foodtech unicorn, which is popular for its quirky advertisements, reported a 25% rise in expenses related to advertising and sales promotion. During the same period, delivery and related expenses rose 43%, hurting the food aggregator’s bottom line.