Zomato Q1 Results: Food delivery back on growth track, gross order value rises 11%

Industry experts have been warning of late that the food delivery market in India is not going to grow at the fast pace of the pandemic years anymore, with the duopoly of Zomato and Swiggy having already penetrated to most well to do households at major urban centres

Zomato’s food delivery gross order value (GOV) expanded 11.4 percent to Rs 7,318 crore in the first quarter of FY24 on a sequential basis, returning to growth after a contraction in the Janaury-March period due to inflation and following concerns about long-term scalability after the food-delivery firm exited 225 cities.

In the March quarter, the GOV for food delivery stood at Rs 6,569 crore which was about a 2 percent fall from Rs 6,680 crore in Q3FY23.

The growth was in line with the management’s guidance after the March quarter results that green shoots were visible in the first week of February and GOV, a metric of valuing online businesses, was expected to expand in the high single digits in Q1 FY24.

ALSO READ: Zomato posts surprise profit of Rs 2 crore in Q1, revenue rises 71% to Rs 2,416 crore

Average monthly transacting users jumped 5.4 percent from 16.6 million in the March quarter to 17.5 million. Zomato posted a surprise net profit of Rs 2 crore in the first quarter of the current financial year and reported revenues of Rs 2,416 crore, up 70.9 percent from the year-ago period, as demand growth recovered on cooling inflation and strength of the food delivery platform’s loyalty programme, as reported on August 3.

"Realistically speaking, we were expecting to hit this milestone in the September quarter (Q2FY24), and we were being conservative in our earlier guidance. However, some critical parts of the team across our businesses out-executed our expectations/plans, and some of our initiatives delivered
better outcomes than we had expected," Akshant Goyal, CFO, Zomato said.

Industry experts have warned that India’s food-delivery market in India will not grow at the pace that it did during the coronavirus years, with the duopoly of Zomato and Swiggy having penetrated most well-to-do households in major urban centres.

Incremental growth in the near future is expected to be mostly driven by loyal users who will order food more frequently.

Quick commerce business

Blinkit, Zomato's quick-commerce business, saw its GOV grow by about 5 percent sequentially to Rs 2,140 crore in Q1FY24 from Rs 2,046 crore in Q4FY23.

At the same time its average order value (AOV) which had dipped in the last quarter, increased to Rs 582 in Q1FY24 from Rs 522 in Q4FY23, a 11.5 percent increase QoQ.

“Getting to sustainable positive contribution at a business level was the first step, but there’s a lot that needs to come together in order to get to Adjusted EBITDA break-even. Doing that in conjunction with the store expansion plan (about 100 net new stores during FY24) is going to be challenging, but the team is very determined to deliver on growth and profitability over the next few months,” Albinder Dhindsa, Founder & CEO, Blinkit said.

On a YoY basis, the AOV was 10.2 percent higher from Rs 528, possibly showing signs that the segment was maturing.

The average monthly transacting customers grew from 2.2 million in Q1FY23 to 3.9 million but remained flat on a sequential basis.

“I can proudly say that Blinkit’s GOV 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," Deepinder Goyal, CEO, Zomato said.

The stock closed at Rs 86.45 a piece on the BSE on August 3, up 1.83 percent from previous close.