Analysts Believe that Zomato's Path to Profitability Over the Next Three Years will Require Two Things

Zomato has been under pressure to become profitable since July of last year when it went public and raised over 9,000 crores from the public. Zomato investors' wealth has been cut in half since the company went public, and there appears to be no end in sight. Brokers believe the company has a good chance of attracting investors in a few years because there is a huge opportunity in front of them.

According to a JM Financial report, Zomato's path to operational profitability necessitates two steps. EBITDA is an acronym that stands for earnings before interest, taxes, depreciation, and amortisation.

“We believe order volumes and contribution margin per order are two key variables that would determine Zomato’s path to profitability. Our analysis suggests the company can turn profitable in FY25 on a cash EBITDA basis if it were to reach annual order volumes of 1 billion (2.5x FY20 levels) and a contribution margin of around ₹21 per order,” said the report.

In addition, the report claims that a ramp-up outside of the food ecosystem can provide incremental growth. The number of online shoppers in India is expected to grow to 300- 350 million by FY25 from 100-110 million in FY20 according to Bain & Company.