Zomato Q3 Results: Competition in quick commerce impacts margins, says company

Zomato, in its Q3 FY25 results, highlighted the challenges faced due to increased competition in the quick commerce segment, which led to a pause in margin expansion. However, the company remains optimistic about sustaining growth across its core businesses.

Key Takeaways from Shareholder’s Letter:

1. Competition in Quick Commerce:
   • Zomato acknowledged heightened competition in the quick commerce business, leading to increased investments and a temporary pause in margin expansion.
   • CEO Albinder Dhindsa stated, “Heightened competition has led to a pause in margin expansion in the business, which is expected and should be temporary.”
2. Growth Summary:
   • Gross Order Value (GOV):
     • Food delivery GOV grew 17% YoY (2% QoQ).
     • Quick commerce GOV increased 120% YoY (27% QoQ).
     • Going-out GOV surged 191% YoY (35% QoQ).
   • Hyperpure (B2B): Revenue grew 95% YoY (13% QoQ).
   • Consolidated Adjusted Revenue: Up 58% YoY to Rs 5,746 crore.
3. Profitability:
   • Consolidated Adjusted EBITDA grew 128% YoY to Rs 285 crore, driven by an improved food delivery Adjusted EBITDA margin (4.3% of GOV vs. 3.0% YoY).
   • Quick commerce losses amounted to Rs 103 crore due to accelerated investments in expanding its store network.
4. Quick Commerce Insights:
   • The company aims to reach its target of 2,000 stores by December 2025, earlier than the initial guidance of December 2026.
   • Albinder Dhindsa emphasized strong customer retention and improving margins in mature store cohorts, with top-performing stores contributing significantly to GOV.
5. Core Customer Retention:
   • Monthly retention of core Blinkit customers has remained stable despite competition, with customers paying an average delivery charge of Rs 20 per order in Q3 FY25.

Q- There has been a sudden surge in competition in the last few months. How has that impacted the business?

Albinder: To us, the biggest impact of the intensifying competition has been the acceleration in customer awareness and adoption of quick commerce. We have seen this play out in the early days of the food delivery business as well, when heightened competition led to higher investments in customer acquisition across the industry as a whole. This eventually (disproportionately) benefitted players with sustained good quality execution. In addition to that, heightened competition has led to a pause in margin expansion in the business, which is expected and should be temporary. So far, we have not seen any attrition of our core customers which tells us that customers are continuing to choose Blinkit over other options.

CEO’s Commentary:

Deepinder Goyal, CEO of Zomato, shared optimism about the long-term growth potential of the business:

• “Investments in quick commerce are helping us establish a strong market presence, and we believe the temporary margin pressures will lead to sustainable long-term profitability.”

Financial Highlights (Q3 FY25):

Disclaimer: The information provided is based on Zomato’s shareholder letter and is for informational purposes only. Always conduct your research or consult a financial advisor before making investment decisions.