Zomato Q2 results: Blinkit turns contribution positive on low base effect

Zomato Q2 FY24: Quick commerce platform Blinkit turned contribution positive for the first time in Q2 FY24, Zomato Q2 results showed. The contribution margin in the business, expressed as percentage of GOV, in the business improved from -7.3 per cent in Q2 FY23 to +1.3 per cent in Q2 FY24. 

Between Julay and September, Blinkit’s GOV increased to Rs 2,760 crore from Rs 1,482 crore in Q2 FY23, registering a growth of 86 per cent year-on-year (YoY).

Albinder Dhindsa, co-founder and CEO of Blinkit, said: "Part of the reason for high growth was the low base effect, given the temporary disruption in the business in the previous quarter. On a YoY basis, the GOV growth was 86 per cent, as expected and in-line with the past."

He added: "GOV growth was largely driven by same store sales growth as we continue to focus on serving more customer needs and ensuring consistency of service levels. We also saw a net addition of 28 new stores during the quarter, taking our overall store count to 411 stores as at the end of the quarter."

Overall, Zomato's GOV across B2C businesses (food delivery + quick commerce + Going-out) grew 13 per can QoQ and 47 per cent YoY.

Blinkit’s adjusted EBITDA margin, as a percentage of GOV, also improved to -4.5 per cent in Q2FY24 from -17.5 per cent in Q2FY23

"Blinkit is seeing good product market fit and is growing well in each of the cities that it is present in currently. In the last 5 quarters post our acquisition of Blinkit, we have seen a steady rise in Blinkit’s GOV as a percentage of Zomato’s GOV in the cities where we have an overlapping presence. In fact, in some of these cities, Blinkit’s GOV is already more than Zomato’s GOV. At this pace, where Blinkit’s GOV is growing at 80%+ YoY, we wouldn’t be surprised if Blinkit’s GOV becomes multiple times larger than Zomato’s GOV in overlapping cities, which will more than compensate for the wider geographical footprint of Zomato," Deepinder Goyal, CEO of Zomato, said in the exchange filing on Friday.

Zomato CFO Akshant Goyal said: "We have also seen festivals driving much stronger growth for quick commerce as compared to food delivery. With major festivals like Navratri, Dussehra, Diwali, etc. lined-up in the December quarter, we expect another high growth quarter from Blinkit."

Zomato acquired Blinkit (formerly Grofers) and its warehousing and ancillary services business in August 2022. The deal was announced in June 2022 after the company board approved the Rs 4,447-crore transaction to acquire Blinkit. The ancillary business was bought for Rs 61 crore.

"The company has completed the acquisition of 100 per cent shareholding of BCPL from its shareholders. Accordingly, BCPL became a wholly owned subsidiary of the Company with immediate effect i.e. from August 10, 2022. This is to further inform the exchange that Zomato Hyperpure Private Limited, material subsidiary of the Company, has acquired the warehousing and ancillary services business of Hands On Trades Private Limited,” the company said in an exchange filing in August 2022.

As per the deal terms, Blinkit’s largest shareholder SoftBank received 28.71 crore shares of Zomato, Tiger Global got 12.34 crore shares, and BCCL received 1.5 crore shares and South Korean investor DAOL will get 3.66 crore shares of the food delivery major.

In the last quarter, in a letter to the shareholders, Goyal wrote: "I can proudly say that Blinkit's GOV (gross order value) is very close to Zomato's GOV in some of the large cities where we have an overlapping presence. This is just the start, and I believe that 10 years from now, Blinkit will drive more value for our shareholders than Zomato."

At that time, Zomato said Blinkit recorded its highest-ever GOV and transacting customers in the months of June and July, after recovering from the business disruption caused by a delivery workers' strike in its biggest market, Delhi-NCR.

Zomato Q2 results

Zomato Ltd. reported a net profit of Rs 36 crore for the September quarter, the company said in an exchange filing. The surge came as a surprise as it had reported a net loss of Rs 251 crore during the same quarter last year.

Revenue for the period grew by 72 per cent year-on-year to Rs 2,848 crore from Rs 1,661 crore. On a sequential basis, the company's revenue grew by 18 per cent, while the operating loss remained nearly the same. During the June quarter, Zomato had reported a net profit of Rs 2 crore.

Zomato said GOV growth was almost entirely led by growth in order volumes, while the average order value remained largely flat. A major key driver of GOV growth was the rapid adoption of Zomato's "Gold" programme, which pushed the ordering frequency among the members.
 

Also read: Zomato shares surge 5% ahead of Q2 results; here're analyst views