Zomato Q2 Results: Blinkit Achieves Positive Contribution Amid Low Base Effect

Zomato, a prominent player in the online food delivery industry, has unveiled its Q2 results, featuring a significant turning point for its quick commerce platform, Blinkit.

Blinkit's Positive Contribution Margin

According to Zomato's Q2 FY24 results, Blinkit achieved a remarkable milestone by turning contribution positive. The contribution margin, expressed as a percentage of Gross Order Value (GOV), improved from -7.3% in Q2 FY23 to +1.3% in Q2 FY24.

Rapid Growth in Blinkit's GOV

Between July and September, Blinkit's Gross Order Value surged to Rs 2,760 crore, marking an 86% year-on-year growth compared to the Rs 1,482 crore reported in Q2 FY23.

Insights from Blinkit's CEO

Albinder Dhindsa, co-founder and CEO of Blinkit, attributed the high growth to the low base effect, stemming from temporary disruptions in the business during the previous quarter. He emphasized that the year-on-year GOV growth of 86% was in line with expectations and driven by same-store sales growth. Dhindsa noted that Blinkit added 28 new stores during the quarter, expanding the total store count to 411.

Zomato's Overall GOV Growth

Zomato's financial report also revealed positive growth trends across its B2C businesses, which encompass food delivery, quick commerce, and going-out services. The Gross Order Value in these sectors grew by 13% quarter-on-quarter and 47% year-on-year.

H3: Improved EBITDA Margin for Blinkit

Blinkit's adjusted EBITDA margin, expressed as a percentage of GOV, exhibited notable improvement, rising from -17.5% in Q2 FY23 to -4.5% in Q2 FY24.

Blinkit's Promising Trajectory

Deepinder Goyal, CEO of Zomato, expressed optimism about Blinkit's performance. He highlighted that Blinkit is witnessing a strong product-market fit and growing steadily in cities where it operates. Blinkit's GOV is already on par with or surpassing Zomato's GOV in overlapping cities, with a remarkable year-on-year growth rate exceeding 80%.

Festivals Driving Quick Commerce Growth

Zomato CFO Akshant Goyal emphasized the role of festivals in driving robust growth for quick commerce, outpacing food delivery. With major festivals like Navratri, Dussehra, and Diwali in the upcoming quarter, Zomato anticipates another period of high growth for Blinkit.

Blinkit Acquisition and Strategic Impact

Zomato's acquisition of Blinkit (formerly Grofers) and its ancillary services business in August 2022 has played a pivotal role in the company's transformation. The acquisition, valued at Rs 4,447 crore, bolstered Zomato's position in the online food delivery and quick commerce space.

Shareholder Benefits and Growth Prospects

Zomato's largest shareholders, including SoftBank, Tiger Global, BCCL, and South Korean investor DAOL, have benefitted from the acquisition. Deepinder Goyal anticipates that Blinkit's value will continue to grow, potentially surpassing Zomato's value in overlapping cities.

Surprising Financial Performance

Zomato reported a net profit of Rs 36 crore for the September quarter, a remarkable turnaround from a net loss of Rs 251 crore during the same period in the previous year. The revenue for this period surged by 72% year-on-year to reach Rs 2,848 crore.

Impact of the Gold Program

The surge in Gross Order Value was significantly driven by increased order volumes, with the adoption of Zomato's "Gold" program contributing to higher order frequency among members.

Zomato's Q2 results reflect the dynamic shifts and positive developments in the online food delivery and quick commerce industry, emphasizing the pivotal role of Blinkit in the company's success.

Relevant and Latest Facts:

• Zomato acquired Blinkit (formerly Grofers) in August 2022.

• Blinkit turned contribution positive for the first time in Q2 FY24.

• Blinkit's GOV increased 86% YoY to Rs 2,760 crore in Q2 FY24.

• Zomato CEO Deepinder Goyal sees Blinkit's GOV becoming multiple times larger than Zomato's GOV in overlapping cities in the future.

• Zomato CFO Akshant Goyal says that festivals are driving much stronger growth for quick commerce as compared to food delivery.

Overall, Zomato's quick commerce arm Blinkit is showing strong growth and profitability. Zomato CEO Deepinder Goyal is bullish on Blinkit's future and sees it becoming a major driver of value for shareholders.