Zomato shares crash 18% in 3 days; Q3 results show Net Profit falls by 57% YoY to ₹59 crores - All you need to know!

As of Wednesday, 22nd January 2025, Zomato's market cap has sunk by ₹44,620 crores during the three-day selloff, falling to Rs 2,01,885 crores! Zomato’s Q3 results showed a 57.3% decline in net profit to ₹59 crores. The decline has been attributed to the company’s increased expenses towards expanding Blinkit. 

As per the Q3 FY 2025 report:

• Revenue rose 64% YoY to ₹5,405 crore, but EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) losses continued for the quick commerce segment - Blinkit.
• The adjusted EBITDA grew by 128% YoY. Howover, on a QoQ basis, the adjusted EBITDA is lower by 14%. 
• Despite ongoing losses, Zomato aims to double Blinkit's dark stores to 2,000 by year-end.
   

What’s up with Zomato and Blinkit?

As per Zomato’s Q3 report of FY 2025, the company reported a 57% year-on-year (YoY) decline in quarterly profit after tax (PAT) at ₹59 crores, down from ₹138 crores in Q3 of FY 2024. 

Blinkit has delivered 12.25 lakh orders per day in Q3 of FY 2025. The company continues to remain in losses but is growing at 100% + on a YoY basis, as per the company report. This comes from the management’s decision of choosing growth over profits and investing in expanding the dark stores pan India. Zomato’s founder Deepinder Goyal commented on the matter saying, “As of now, it seems like we will get to our target of 2,000 stores by Dec 2025, much earlier than our previous guidance of Dec 2026".
 

Immediate Impact on Zomato’s Share Price

As on 21st January 2025, Zomato’s share price saw a steep decline of 10.16% taking the per share price to ₹215.4. Macquarie has predicted that Zomato shares could fall to ₹130, given the disappointing Q3 results and rising competition.
 

Financial Overview of Zomato

As of 21st Jan 2025, Zomato’s market cap stood at ₹2,07,475 Crores. The net profit is down for the last 3 quarters, slumping from ₹253 Crores to  ₹59 Crores (average decrease of 48.5% per quarter). 

In the last 1 year, Zomato has outperformed top 5 stocks with highest market-cap in Online Services. However, on the other hand, the stock has moved down by -22.8% in the last one month alone. 
 

Strengths for the Zomato Share

1. Positive Quarterly Expectations: Analysts are optimistic about Zomato’s upcoming quarter, projecting double-digit revenue growth year-on-year due to its increasing user base and higher average order value. Strategic acquisitions, like Blinkit, have also bolstered its market presence and diversified its revenue streams, positioning it for consistent performance.
2. Improved Working Capital Efficiency:  Zomato has significantly reduced its working capital requirements from 191 days to just 46 days. This is a testimonial of Zomato’s streamlined operations which directly contribute to stronger cash flow.
    

Weaknesses for the Zomato Share

1. Losses in Quick Commerce segment: The quick commerce segment incurred a loss of INR 103 crore in Q3FY25, and management expects further near-term losses due to network underutilization as stores ramp up.
2. High Cash burn and Capex: Elevated capital expenditure for store and warehouse expansions could strain cash flow, with depreciation costs expected to rise. Although cash reserves are strong at INR 19,235 crore, sustained high investments could deplete resources, especially if projected growth doesn't materialize.
3. High Competition: Heightened competition has led to a pause in margin expansion for the business which the management expects to be temporary. Moreover, this competitive intensity has resulted in increased cost of retaining and acquiring talent specifically in the q-comm business which is expected to continue.
    

About Zomato

One of India’s leading online food ordering and delivery platforms, Zomato launched in 2010 with a brand vision of “better food for more people”. Over the years, Zomato has expanded its portfolio through various sub-brands and subsidiaries, including:

1. Blinkit - Enabling lightning fast deliveries in minutes. Blinkit is owned & managed by "Blink Commerce Private Limited” (formerly known as Grofers India Private Limited). The company has quickly emerged to be one of India’s largest e-grocery companies. 

2. Hyperpure - Offering high-quality ingredients sourced directly from farmers, Hyperpure by Zomato streamlines restaurant supply chains.

3. Feeding India - Zomato’s non-profit organisation, Feeding India works with  on-ground partners towards education and child/maternal malnutrition by providing regular meals, with over 17 crore meals being served till date. 

5. District - Zomato’s latest online platform, District combines the best of events, movies, dining options for users to choose from. The District App has recently crossed 6.5 million downloads.

6. Zomato Live - With events tailored to a user’s preferences and exclusive discounts and offers, Zomato Live lets users book tickets to India's best events and concerts, with real time support for bookings.

7. Zomaland - One of India’s largest food & entertainment carnivals, Zomaland by Zomato offers culinary delights, fun games, artist performances and more, as a part of their weekend festivals across multiple cities. 

8. Weather Union - Curated as India’s first crowd-supported weather infrastructure, Weather Union by Zomato aims to give users live weather information with it’s on-ground network of weather stations installed across the country.

Peer Comparison for Zomato: Swiggy, Devyani International and Jubliant Foodworks

Swiggy: Founded in 2014, Swiggy is one of India’s biggest online food ordering and delivery companies. As of 21st January 2025, Swiggy’s market cap stands at  ₹1,07,266.4 crores. Headquartered in Bangalore and serving over 500 cities pan India, Swiggy also provides quick commerce services under the name Swiggy Instamart, and same-day package deliveries with Swiggy Genie. On January 21, 2025, Swiggy's stock experienced a significant decline, dropping over 11% to ₹427.20 following disappointing results from competitor Zomato. 

Devyani International Ltd:  Devyani International Ltd (DIL) is a leading F&B conglomerate in India. Founded in 1992 by Mr. Ravi Jaipuria, the company has grown to become one of the largest F&B players in the country. Brands under Devyani International include Pizza Hut, Costa Coffee, Vaango and more. As of 21st January 2025, Swiggy’s market cap stands at ₹21,107.25 crores. DIL’s operations include manufacturing, distribution, franchising, and retailing of beverages, ice creams, and food products.

Jubilant Foodworks Ltd: Jubilant Foodworks Ltd is a leading food service company in India. Incorporated in 1995, Jubilant Foodworks Ltd is the exclusive master franchisee of Domino's Pizza in India, Bangladesh, Sri Lanka and Nepal. As of 21st January 2025, Swiggy’s market cap stands at ₹41,240.33 crores. Domino's Pizza is among the most popular product of Jubilant Foodworks Ltd, and is the largest pizza chain in India. 

What’s the future for Zomato and the online Food Delivery Space?

Despite a 57% dip in Q3 profits, Zomato’s long-term potential remains robust, backed by the growing food delivery market in India. The Indian online food delivery market is projected to grow at a CAGR of 10.5% by 2028, providing Zomato with ample opportunities to scale. Urbanization, increased smartphone penetration, and demand from tier-2 and tier-3 cities are driving this growth. Zomato’s investments in quick commerce through Blinkit and its focus on subscription models like Zomato Gold position it well for innovation and diversification. 
 

However, profitability will depend on reducing operational costs, strengthening restaurant partnerships, and balancing discounts strategically. As competition intensifies and regulations evolve, sustainability initiatives and consumer trust will be pivotal for the future of Zomato and the broader food delivery sector.

Conclusion

Zomato’s Q3 results reflect a challenging yet transformative phase for the company. While the 57% dip in net profit raises concerns about rising costs and competitive pressures, Zomato’s strategic focus on diversification through Blinkit and loyalty programs like Zomato Gold suggests a long-term growth mindset.

For investors, it’s essential to weigh the company’s strengths, such as market leadership and innovation, against its challenges, like profitability and intense competition. As the online food delivery space continues to evolve, Zomato’s ability to adapt, optimize costs, and capture untapped markets will determine its future trajectory. Staying informed and monitoring quarterly updates can help investors make confident decisions while navigating the potential risks and opportunities Zomato offers.

For investors investing in the Zomato share or any other Indian stocks, it’s essential to take a balanced approach. As always, conducting in-depth research can help make more informed and confident investment choices. 
 

Disclaimer

This blog is for general/educational information purposes and is no way to be considered as advice, or recommendation for investment or otherwise.

Investment in securities market are subject to market risk, read all the documents carefully before investing. The securities quoted are exemplary and not to be considered as any kind of advice or recommendation. The past performance of the stocks are not necessarily indicative of future performance. INDmoney Private Limited 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500.

Sources: Zomato, Tijori Finance, Screener, INDmoney, Swiggy