After Reporting INR 346.6 Cr Loss In Q3FY23, Goyal Sees Zomato Making $1 Bn Profit By 2030

In a bold statement, Zomato’s cofounder and CEO Deepinder Goyal has stated that the listed foodtech startup could reach a size of $100 Bn in the next seven to eight years.

Goyal added that by that time, Zomato could have a profit of more than $1 Bn.

“Internally, that is the goal that by 2030ish we should be about 100ish billion and the way we see the business growing and changing in terms of scale and profit I think we can easily be billion dollars plus in profit in seven-eight years’ time,” Goyal said in a conversation with ET.

If the future the Zomato CEO envisions comes to be, the foodtech would become the largest of its kind in the world.

However, Goyal’s comments come after Zomato reported a loss of INR 346.6 Cr in the third quarter of the financial year 2022-23 (Q3FY23), up 38% sequentially from INR 250.8 Cr in the previous quarter.

Further, the company’s market cap at the market’s close on Tuesday (February 28) was INR 44,809 Cr ($5.42 Bn). For Zomato to hit a $100 Bn valuation, then, the company’s share price needs to go up by nearly 18.5 times or reach a price of nearly INR 985 apiece, compared to Tuesday’s close of INR 53.35 apiece.

Fading Core Business, Burning Cash In Q-Commerce: Zomato’s Many Woes

According to Zomato’s Q3FY23 results, the food delivery vertical generated an adjusted revenue of INR 1,565 Cr in Q3FY23, down 1% from INR 1,581 Cr in Q2FY23, but up 30.42% compared to INR 1,200 Cr in the year-ago quarter.

The number of monthly transacting users also fell slightly, reaching 17.4 Mn during the quarter ended December 31, 2022, compared to 17.5 Mn the quarter before.

“It remains a challenging demand environment, but we are seeing green shoots of demand coming back in the recent weeks, which makes us believe that the worst may be behind us,” said Akshant Goyal, Zomato CFO, during an earnings call.

Be that as it may, Zomato has mostly put down the slowdown on industry factors, including a macro slowdown for the mid-market segment and a boom in dining out and travel for the premium end.

Coming to Zomato’s now infamous adjusted EBITDA metric, its food delivery business became adjusted EBITDA positive in Q2FY23, with the December quarter recording an adjusted EBITDA of INR 23 Cr.

At a company-wide level, Zomato’s adjusted EBITDA stood at -INR 265 Cr in Q3 FY23, down 38% sequentially compared to -INR 192 Cr in the previous quarter. A year ago, the foodtech major was only slightly higher at INR -272 Cr.

Though Zomato might call this sandbagging, the fact of the matter is that Blinkit has bogged down the foodtech’s performance rather than augment it. The quick commerce arm recorded an adjusted EBITDA of -INR 227 Cr in Q3 FY23, almost 86% of the foodtech’s total adjusted EBITDA.

In terms of other metrics, Blinkit saw a rise in the number of orders, reaching 31.6 Mn in Q3FY23 compared to 26.1 Mn in Q2FY23. At the same time, the quick commerce vertical’s average monthly transacting users increased to 3.1 Mn in the quarter under review, up 19% compared to 2.6 Mn in the previous quarter.

However, the average order value reduced by about 2.65% in the December quarter, from INR 568 per order in Q2FY23 to INR 553 per order.

When Zomato picked up Blinkit for an eyewatering INR 4,447 Cr last year, it would have looked like a good move – its eternal rival Swiggy has developed a grocery delivery vertical as well and quick commerce was on the rise. 

Less than a year on and quick commerce has faded into obscurity, with companies having realised that no one actually needs their vegetables delivered in 10 minutes or less. Plus, the economics of an order becomes unsustainable as logistics costs rise.

Foodtech – Just Like All Startups – Is In Disarray

Competitors like Swiggy are all struggling to achieve profitability amid an ongoing funding winter paired with a fall in demand across the board. Swiggy has been saddled with increasing competition in the market as its losses reached INR 3,629 Cr In FY22.

For comparison, Zomato recorded a loss of INR 1,223 Cr in FY22, only about a third of Swiggy’s losses in the same financial year.

Comparing the two foodtech giants’ revenue, it is clear that Swiggy had held the lead in market share in FY22, as the decacorn posted revenue of INR 6,119.8 Cr in the financial year. During the same year, Zomato’s revenue stood at INR 4,192 Cr.

However, according to recent reports by Jefferies and other analytics firms, Zomato has captured a larger share of India’s foodtech market than Swiggy. With Swiggy gearing up for an IPO as well, it would be interesting to see how the two companies pit against each other once they both are on equal footing.

Circling back to Deepinder Goyal’s optimism, it is certain that India’s food delivery market is still in its infancy. However, what Zomato would do to hit $1 Bn in profitability is currently beyond the scope of comprehension, though increasing commissions from restaurants might be on the table.