Zomato soars 13% on heavy volume as net loss narrows to Rs 251 cr in Q2

Shares of Zomato soared 13 per cent to Rs 72.55 per share in Friday’s intra-day trade, amid heavy volumes, after the food delivery aggregator's net loss narrowed to Rs 251 crore for the September quarter (Q2FY23), as against Rs 429.6 crore, in the year-ago period.

The company's revenue, too, increased 62.2 per cent year-on-year (YoY) to Rs 1,661 crore in Q2FY23 as against Rs 1,024 crore in Q2FY22. Zomato’s food delivery gross order value, meanwhile, grew 3.1 per cent QoQ and 22.6 per cent YoY in Q2FY23.

Since the acquisition of Blinkit (quick commerce) closed on August 10, 2022, only 50 days of Blinkit consolidated results contributed into overall financials, the company said.

Adjusted Ebitda losses for Zomato (ex-quick commerce) for the quarter, however, was down to Rs 60 crore as compared to Rs 310 crore in Q2FY22. The management expected the adjusted Ebitda loss (ex-quick commerce) to come down further and eventually get to break-even in the next 2 to 4 quarters.

"The increase in contribution margin was driven by improvements on both cost and revenue side. This has been the result of scale and heightened focus on profitability over the last few quarters," the company said.

Analysts at ICICI Securities believe that the management’s guidance towards attaining Ebitda-breakeven for Zomato's business by Q1FY24 would require careful calibration of employee expenses and marketing spends. The brokerage firm, therefore, estimates EBITDA margin of -1.3 per cent by FY24E.

"The hyperpure business (B2B e-commerce vertical of Zomato) is likely to benefit from growth in the overall segment. However, scale-up of Hyperpure will be contingent on significant investments in building refrigerated supply chains and technology for tagging and batching of fresh farm produce," the brokerage firm said, maintaining a ‘hold’ rating on the stock, with a target price of Rs 65 per share.

Besides, analysts at JPMorgan expect the food business to break even by Q1FY24, and overall business in Q3FY24.

"The combined business is likely to benefit from better unit economics as Blinkit drives up frequencies and Zomato drives traffic, which will eventually drive CAC/delivery costs down and take-rates up, the brokerage firm said.

At 02:13 pm, shares of Zomato traded 12 per cent higher at Rs 71.75 apiece, as compared to 1.9 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped over five-fold as around 344 million equity shares, representing 4 per cent of total equity of Zomato, had changed hands on the NSE and BSE.

Meanwhile, in the past three months, the stock outperformed market as shares gained 25 per cent, as against 3.9 per cent rise in the S&P BSE Sensex. The stock has recovered 78 per cent from its record low price of Rs 40.55, which it had touched on July 27, 2022.

In the past one year, however, the market price of Zomato has almost halved, as against 3 per cent gain in the benchmark index. That apart, it had hit an all-time high of Rs 169 on November 16, 2021.