Zomato: Can it turn its luck

around?
August 2023
Company Overview
Zomato is an Indian restaurant aggregator and food delivery company. Zomato's core
business is Food Ordering And Delivery Platform where customers can search and
discover local restaurants, order food, and have it delivered reliably and quickly.

The company also has other core offerings such as a Quick Commerce Platform (blinkit)
where customers can order everyday needs across thousands of products and have them
delivered within minutes and a B2B platform (hyperpure) supplying high quality food
ingredients and other products.

In FY23, 647.0 million orders were delivered to 58 million annual transacting customers on
our platform.
Core
Businesses
Zomato operates a technology platform that provides customers with a convenient, on-demand solution to
search and discover restaurants, order food, and have it delivered reliably and quickly. Orders placed on the
platform are fulfilled by a last-mile delivery fleet comprising independent delivery partners who onboard
themselves on the platform.

In FY23, 647.0 million orders were delivered to 58 million annual transacting customers on the platform.

With the objective of serving more use cases and offering more convenience to their customers, two new
initiatives were introduced in FY23 within the food delivery business -

1. Intercity Legends which lets customers order iconic dishes of legendary restaurants across the country and
have them delivered to their doorstep.
2. Zomato Everyday offers customers home-style meals at affordable price points starting as low as Rs. 89.
FY23 key metrics
Average monthly
GOV Orders
transacting customers

INR 263.1 billion 647.0 million

647.0 million
YoY growth: 24% YoY growth: 21%
YoY growth: 21%

Average monthly active Average monthly active Zomato Gold active

delivery partners food delivery restaurant members
partners
326k 1.8 million
210k
YoY growth: 14% YoY growth: 17% Launched in Jan-23
Future Growth Prospects
The company has witnessed a substantial upswing in its annual transacting customer base. In the fiscal year 2021, the
average monthly count of transacting customers stood at 6.8 million, marking a remarkable ascent to 17.0 million in the
fiscal year 2023. Furthermore, the organization has experienced a notable surge in its annual ordering frequency,
escalating from 28 million orders in fiscal year 2019 to an impressive 58 million orders in fiscal year 2023.

In tandem with this growth, the company has significantly augmented its ecosystem of restaurant partners on its platform,
surging from 110,000 partners in fiscal year 2019 to an impressive 210,000 partners in fiscal year 2023.

Moreover, the company has demonstrated an impressive trajectory in enhancing commission and advertising revenues
per order, concurrently effecting a reduction in discounts and other variable costs on a per-order basis.

This holistic approach underscores the company's commitment towards sustainable and profitable growth.

In the latest Quarterly Shareholders' Letter and Results for Q1 FY24, the company has communicated that it anticipates a
continued, impressive trajectory of achieving year-over-year topline growth(consolidated), with a minimum threshold of
40%, for at least the forthcoming couple of years. This resolute commitment underscores the company's dedication to
long-term, sustained growth and value creation for its shareholders.
In January 2023 Zomato launched a new membership program with a host of benefits including free delivery on orders
meeting certain criteria, an on-time guarantee, priority access to more restaurants during peak hours and exclusive offers
from a number of restaurants on both delivery and dining-out.

Customers can become Zomato Gold members by paying a membership fee. As of the end of FY23, Zomato Gold had 1.8
million active members.

Zomatohas started reclaiming some of its market share from rival Swiggy in the food delivery play, helped by an uptick in
Gold membership signups. The comeback of the Gold programme is also expected to help Zomato improve its unit
economics in the current quarter though the food delivery market may slow down further, as per a report by HSBC.
Hyperpure is a B2B supplies offering for restaurants in India. They source fresh, hygienic,
quality ingredients and supplies directly from farmers, mills, producers and processors to
supply to their restaurant partners, helping them make their supply chains more effective
and predictable, while improving the overall quality of the food being served. Hyperpure
solves multiple problems for restaurants by acting as a one stop solution for high-quality
ingredients at competitive prices along with a reliable delivery service.

Quick commerce is turning out to be another opportunity for Hyperpure. It has begun
supplying to the sellers on Blinkit’s marketplace post our acquisition of Blinkit. This has the
potential to further accelerate revenue growth for Hyperpure going forward.
FY23 key metrics

# of unique restaurant
Revenue
outlets served
INR 15.1 billion
72k
YoY growth: 180%
YoY growth: 41%
Future Growth Prospects

Hyperpure revenues grew from INR 2.0 billion in FY21 to INR 15.1 billion in FY23 driven by both addition
of new customers as well as an increase in spending of existing customers on the platform.

Hyperpure has also begun tapping into the quick commerce opportunity. Part of the revenue growth in
FY23 was on account of goods supplied to the sellers on Blinkit’s marketplace and this is expected to
become a more meaningful opportunity for Hyperpure in the future.

A delivery charge for orders below a certain minimum value was also introduced, which
will further aid in profitability. In March 2023, Bangalore became profitable (before allocating central
corporate overheads) which is a good sign for future profitability.
Zomato completed its acquisition of Blinkit on August 10, 2022 and since then Blinkit
operates as a wholly owned subsidiary of Zomato Limited.

Blinkit is a quick commerce marketplace delivering everyday products to customers within

minutes. Blinkit hosts thousands of SKUs across a variety of product categories, in a
network of warehouses and distributed dark stores.

Blinkit also facilitates last-mile delivery of products to customers from dark stores. These
dark stores are located close to the customer within a radius of 2-3 kms which allows for
the quick delivery.
FY23 key metrics

Average monthly
GOV Orders transacting
customers

INR 64.5 billion 119.1 million 2.9 million

GOV per day, per # of dark # of active

stores(Mar-23) cities(Mar-23)
dark store

377 19
470k Dark Stores Cities
Future Growth Prospects

Zomato completed its acquisition of Blinkit on August 10, 2022, and since then Blinkit has operated as a wholly-owned
subsidiary of Zomato Limited.

Revenue in the quick commerce market is expected to show an annual growth rate (CAGR 2023-2027) of 49.52%.
Average monthly transacting customers grew 80% from 2.2 million in Q1FY23 to 3.9 million in Q4FY23, primarily driven by
new customer additions in existing cities.

GOV grew by 74% from INR 11.72 billion in Q1FY23 to INR 20.46 billion in Q4FY23, driven primarily by an increase in order
volumes. Revenue grew faster from INR 1.64 billion in Q1FY23 to INR 3.63 billion in Q4FY23 (121% growth), driven by
higher commission income, customer delivery charges and ad revenue per order.

Dark store and replenishment cost per order decreased driven by operating leverage as the throughput per dark store
increased. Last-mile delivery costs and other variable costs per order also decreased driven by efficiency gains.

These factors collectively exemplify the company's strategic emphasis on the quick commerce segment, poised to yield
substantial revenues and profits.
Valuation
Conclusion

I believe Zomato is a money-losing company right now but in the coming years
will turn into a profitable one with high growth potential.

I believe the company is overvalued right now but I would have no problem
investing in the stock if the price drops .