When it rains, it pours. And for Zomato share price, that’s exactly what happened this Tuesday, January 21. Following the release of its December quarter (Q3 FY25) results, Zomato’s stock took a nosedive, plummeting by as much as 13.3% to ₹207.80 on the NSE. Investors weren’t impressed, and the market responded with relentless selling pressure.
Let’s dive into what caused this dramatic turn of events and what it means for the food delivery giant.
Q3 Results: A Bitter Pill for Investors
Zomato share price latest financial performance didn’t sit well with investors. The company reported a 57.2% drop in consolidated net profit, falling from ₹138 crore in the same quarter last year to just ₹59 crore this year. That’s a significant hit, no matter how you slice it.
On the revenue side, things looked better at first glance. The company’s consolidated revenue from operations jumped to ₹5,405 crore, compared to ₹3,288 crore in the corresponding quarter last year. But here’s the kicker: total expenses surged too, skyrocketing to ₹5,533 crore from ₹3,383 crore. That’s a clear mismatch that left the bottom line suffering.
Breaking Down Revenue Segments
Zomato has its fingers in many pies, and its revenue reporting reflects that diversity. Key segments include:
- India Food Ordering and Delivery
- Hyperpure Supplies (B2B Business)
- Quick Commerce (via Blinkit)
- Going Out
- Residual Segments
Despite a 2% quarter-on-quarter and 17% year-on-year growth in food delivery, the company described this performance as driven by a “broad-based demand slowdown.” For a business heavily reliant on consumer spending, that’s a red flag.
Nomura’s Take on Zomato’s Performance
Global brokerage firm Nomura wasn’t too optimistic either. It called Zomato’s food delivery growth “subpar” for the quarter, citing lower-than-expected growth in gross order values (GOV). Nomura now anticipates 17–20% GOV growth in FY25 and FY26, paired with an 8–9% contribution margin.
The spotlight is also on Blinkit, Zomato’s quick commerce arm, which ramped up store expansion efforts. By the end of FY25, Blinkit aims to hit 2,000 stores. As of now, it’s already crossed the 1,000-store mark in just nine months. However, fierce competition in this space means there’s little room for error.
The Competitive Landscape
Zomato’s letter to shareholders didn’t shy away from addressing the elephant in the room: intensifying competition. Rivalry has driven greater awareness and adoption of quick commerce among customers. According to the company, this is reminiscent of the early days of food delivery when industry-wide customer acquisition investments soared.
The company emphasized that its core customers remain loyal, stating, “So far, we have not seen any attrition of our core customers, which tells us that customers are continuing to choose Blinkit over other options.”
Margin Expansion: On Pause for Now
Zomato admitted that heightened competition has temporarily paused its margin expansion. But the company remains hopeful, viewing this as a short-term setback rather than a long-term problem. Time will tell if this optimism is well-placed.
Swiggy Feeling the Heat Too
Zomato isn’t the only player facing turbulence. Its rival, Swiggy, also saw its shares take a hit, dropping 11% on the NSE. This ripple effect underscores just how competitive and challenging the food delivery market has become.
Blinkit’s Rapid Expansion: A Double-Edged Sword?
While Blinkit’s growth is impressive, expanding store counts at such a rapid pace could strain resources and profitability. With over 1,007 stores now operational, the brand is betting big on capturing market share. But can it sustain this momentum without burning through cash?
Looking Ahead: What’s Next for Zomato?
So, where does Zomato go from here? Nomura’s projections offer some hope, with GOV growth expected to pick up over the next two fiscal years. However, achieving sustainable profitability in a cutthroat market will be no small feat.
Investors will also keep a close eye on how Zomato balances growth with cost management, especially in its quick commerce segment. Blinkit’s success will be pivotal in shaping the company’s future trajectory.
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Conclusion
The free fall in Zomato share price is a stark reminder that growth alone isn’t enough. Profitability and prudent financial management are equally important. While the company has demonstrated resilience in the past, the road ahead is fraught with challenges.
For now, Zomato’s story is one of promise tempered by caution. Whether it can turn things around remains to be seen, but one thing is clear: investors are watching closely.