The Zomato Mindset

 


The current scenario at Zomato refers to “A Positive Mindset can Drive a Person but not an Organization.”

The top management of Zomato is giving an upper hand to growth rather than profitability in which they are justifying these terms on the mindset that Growth would eventually lead to Profitable Business in upcoming months. Long term Sustainability is still visible to the team.

Where the company’s food delivery business saw a macro-slowdown but other quick commerce businesses “Hyperpure” and “Blinkit” displayed substantial growth on local and national level. This growth is definitely a positive development for the company but they aren’t huge revenue contributors to the total revenue. Both these businesses are renowned names in their respective sectors and have done good business overall in Q3 FY23. They only contribute 17.5% (Hyperpure) and 12.75% (Blinkit) of revenue. They did show growth in the quarter but as low revenue contributors, it won’t change much of the topline. These are still unprofitable.

The company’s current focus is on the Brand new Membership Concept of “Zomato Gold” in which the customer is made available multiple services like On-Time Guarantee & Exclusive Access to Restaurants in Peak Hours for Both Delivery and Dining Out. But according to the numbers provided by the company, there are 900K subscribers of Zomato Gold. The total subscription base of Zomato is 58 million users in FY22-23. So if we look at Zomato Gold Subscribers as compared to total Zomato users, it just comes to 1.5% of the total Zomato User Base. Now, this definitely raises a question as to how many of these subscribers will renew their Gold subscriptions every time and how loyal will they remain to these extra services that Zomato provides.

They are also closing down their food delivery business in unprofitable smaller cities which is a positive development from an investor’s perspective but definitely will have an impact on the user base.

Given the above points which I focused on, I doubt how they will achieve Adjusted EBITDA of 4-5% of GOV by Q2FY24.  The question definitely still seems to be unanswered.

Let us know what you Think in the Comments Section of the Blog.


References: 

https://www.bseindia.com/xml-data/corpfiling/AttachHis/8796b22f-7855-4956-afe2-409350dd685a.pdf

https://timesofindia.indiatimes.com/business/india-business/was-zomatos-q3fy23-a-blockbuster-or-flop/articleshow/97804864.cms 

 





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