Zomato posts Q3 profit at ₹138 cr on improving margins

Food-tech major Zomato Ltd has reported a consolidated net profit of ₹138 crore for the December quarter against a loss of ₹367 crore in the year-ago period, driven by topline growth, and gross order value (GOV) growth across Zomato food delivery and Blinkit. The company says it has led to improving margins also helped by ad monetisation and platform fees.

This is Zomato's third straight quarter of profit. Zomato reported ₹276 crore profit in Q2 FY24 and ₹181.70 crore profit in Q2 FY24.

The company's consolidated adjusted revenue grew 68.8% year-on-year to ₹3,288 crore against ₹1,948 crore in Q3 FY23.

Zomato says its consolidated EBITDA (earnings before interest, taxes, depreciation, and amortisation) for the quarter stood at ₹51 crore against an EBITDA loss of ₹366 crore in the year-ago period, while EBITDA margin for the quarter was recorded at 1.5%.

Deepinder Goyal, CEO, Zomato, says considering the consolidated topline growth, he thinks it'll surpass the earlier expectation of 40% YoY to 50%. In food delivery, Goyal says the new-age company's GOV growth came out to be 25%+ YoY in Q3 FY24. "At this point, we expect GOV to continue growing at 20%+ YoY, and perhaps accelerate further if we see more than expected market share gains and revival in macro consumer demand."

As per Goyal, the GOV growth at its quick commerce platform Blinkit more than doubled in Q3. "Losses continue to decline and we are on track to meet our guidance of Adjusted EBITDA break-even on or before Q1FY25."

In the wake of the "muted" demand environment in Q3FY24 in terms of "discretionary consumption", Rakesh Ranjan, CEO, food delivery, says the company's food delivery GOV growth at 27% YoY was "lower" than the company's expectations but still higher than some other players.

"The monthly active restaurant base on our platform has grown by 20%+ YoY in Q3FY24. This growth is driven both by new restaurants opening up and our coverage of existing restaurants increasing."

On the weakness in demand trend in Q4 FY24, Rakesh says it's trending as per the company's "projections" so far.

Amid the falling adjusted revenue as a percentage of GOV in Q3FY24, given the ad revenue and platform fee revenue have increased, Zomato CFO Akshant Goyal explains that only a small fraction of the platform fee collected is reflected in the reported revenue.

On the plans of increasing the platform fee going forward, Rakesh says the company will tactically use levers like these to optimise growth and margin expansion.

Speaking about the GOV growth in Blinkit, CEO Albinder Dhindsa says the demand was backed by multiple festivals and occasions in the quarter.

Detailing about the cash balance at the end of Q3FY24, Akshant says the cash balance increased by ₹254 crore in the quarter, the third consecutive quarter of increase in our cash balance.

Zomato had reported a net profit of ₹116.90 crore for the fiscal year FY23, while its revenue was recorded at 4,707.40 crore. The positive quarterly results propelled the Zomato stock to the green territory after the intra-day fall of ₹139.10. The stock closed 2.42% up at ₹144 on the BSE, taking the company's m-cap to ₹1,25,437.19 crore.

Brokerage ICICI Securities in its November 2023 report had changed its revenue and adjusted EBITDA estimates for Zoamto by 1.9%/1.8% and 4.5%/3.7% for FY25E/26E. Maintaining its “BUY” rating on the stock, it had also upgraded the price target to INR164 from INR 160 earlier.