Zomato, the food delivery platform which posted a surprise profit after tax (PAT) of Rs 2 crore in the quarter gone by, has set an ambitious goal of growing its core business, food delivery, at 25-30 percent in FY24 and FY25, it told analysts on August 3.
Earlier in the day, Zomato registered a net profit of Rs 2 crore in Q1FY24, a sharp u-turn from a loss of Rs 186 crore that it had incurred in the same quarter last year, on the back of a growing transacting base. The base of average monthly transacting users for Zomato jumped 5.4 percent from 16.6 million in the March quarter to 17.5 million in the June quarter.
Cementing views that the momentum would be maintained, CFO Akshant Goyal said the company will continue to deliver over 40 percent year-on-year adjusted revenue growth for at least the next couple of years, which analysts said would translate to a 25-30 percent growth.
While CFO Goyal seemed to agree with that calculation, analysts quizzed the management on the growth drivers, especially when things were not looking this positive about even a quarter back when Zomato incurred a loss of Rs 188 crore.
“If we look at the last quarter, we've grown 11 percent on GOV terms sequentially and around 15 percent in terms of revenues for the food delivery business. So, if we are doing that in one quarter, we can easily aim for a 20 to 30 percent growth in revenue for this year and the next. The worst is behind us in terms of the demand slowdown…,” Goyal told analysts during a call.
While Zomato’s metrics – GOV, revenues and even the transacting user base, delivery costs – all showed signs of improvement, Moneycontrol took a closer look at how a critical tax provision helped Zomato PAT its own back.
At a time when food inflation was hurting restaurants and consumers alike, Goyal said the company was not seeing any impact on the business.
Even quick-service restaurants (QSR) were hurt and since QSRs and food delivery platforms are closely tied to each other, analysts asked if a slowdown in their growth would drag down Zomato’s prospects as well. CFO Goyal, however, said Zomato was seeing no impact but was in fact seeing “robust” ad spends from small restaurants that were supporting Zomato’s take rates.
“QSRs contribute single-digit percentage points of our business overall. Most of our business on our platform happens through smaller restaurants and a few outlet chains,” he added. Smaller chains were spending more on ads because of the potential business they lost out on over the past year or so.
Another app?
Zomato is also mulling a fourth business after food delivery, Blinkit and Hyperpure.
“Dining-out + Live = “Going-out”. We believe this combo could be the fourth large business coming out of Zomato…Next quarter onwards, we are going to report ‘Going-out’ as a separate business segment in our financials,” Deepinder Goyal, Founder & CEO, Zomato said.
Currently dining out accounts for about seven percent of Zomato’s GOV.
“We are also contemplating spinning out our Going-out business into a separate app, in-line with our so-far-successful strategy of building super brands (and not super apps),” CEO Goyal added. The company however said that it will be housed in the core app as well, similar to Blinkit.
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