Zomato Q2 Results: Earns Rs 36 Crore Profit; Stock Hits New 1-Year High, M-Cap Crosses Rs 1 Lakh Crore

Food delivery app, Zomato continued to earn profits in its financial books. The company's net profit which was merely Rs 2 crore three-months ago, has now climbed to Rs 36 crore between July to September 2023 period. Zomata has turned profitable since Q1FY24. It had posted a net loss of Rs 251 crore in Q2 of FY23.

The top-line front also witnessed robust growth. In Q2FY24, the company's revenue from operations jumped to Rs 2,848 crore, as against Rs 1,661 crore in Q2FY23 and Rs 2,416 crore in Q1FY24.

Due to robust earnings, Zomato shares ended at Rs 116.40 apiece up by a huge 8.28% on BSE. The stock had touched a new 52-week high of Rs 120 per share during trading hours. Also, the company's m-cap crossed Rs 1 lakh crore mark to stay at Rs 1,00,155.75 crore after market hours of Friday.

CEO of Zomato, Deepinder Goyal talked about the Q2FY24 performance. In the shareholders' note, he said, "The growth momentum we witnessed in Q1FY24 continued in Q2FY24 driven by healthy growth across all our businesses."

Goyal added, that GOV across our B2C businesses (food delivery + quick commerce + Going-out) grew 13% QoQ/ 47% YoY. Food delivery GOV grew 9% QoQ/ 20% YoY and is recovering well from the demand slowdown we witnessed in the last two-quarters of FY23. Quick commerce bounced back with a 29% QoQ GOV growth following tepid growth in Q1FY24 (due to temporary disruptions in the business).

Further, Rakesh Ranjan of Zomato highlighted that "GOV growth was almost entirely led by growth in order volumes, while the average order value remained largely flat. A visible uptick in demand coupled with some great execution by the team led to robust growth in order volumes. Order volume growth is typically negatively impacted in this quarter due to lower delivery partner availability during rains. However, this year we were able to improve on that through better all-round execution."

Another key driver of GOV growth in the quarter was the growing adoption of our Gold program, which is continuing to drive higher ordering frequency amongst members. Rakesh added, "We now have 3.8 million members (as of the end of Q2FY24) that contribute ~40% of GOV in the food delivery business."

Talking about the festive period and the ongoing Cricket World Cup, Rakesh said, "The festive period in Q3FY24 is usually a mixed bag for the food delivery business. While people order more around the festivals, at the same time, they also travel and eat out more in this quarter. A lot of Indians also observe fasts during the Navratri festival and Shradh period (both of which are in Q3FY24 this year due to a late Diwali), which tend to dampen order volumes during the quarter. The Cricket World Cup should result in additional order volumes, but we think that the demand uptick would be limited to a handful of match days and hence, not very significant."

Also, Akshant Goyal, CFO said, "On balance, we think that QoQ GOV growth in food delivery in the next quarter should be moderate - around high single digit which should translate to about 25-30% YoY GOV growth."

Going forward, Akshant further added, "We think that the majority of the growth will come from growth in MTC, as more of our low-frequency customers start ordering more frequently. In our business today, ~6 crore annual transacting customer (ATC) base translates to only about 1.8 crore MTC (about 30% of the ATC). As more of our ATC base starts transacting every month, the 30% number will keep increasing, resulting in growth in MTC. On top of that, we will also keep adding new customers every month to the ATC base which will further drive the growth of MTC."

On its grocery delivery app, Blinkit, Deepinder said, "Blinkit is seeing good product-market fit and is growing well in each of the cities that it is present in currently. In the last 5 quarters post our acquisition of Blinkit, we have seen a steady rise in Blinkit's GOV as a percentage of Zomato's GOV in the cities where we have an overlapping presence."

"In fact, in some of these cities, Blinkit's GOV is already more than Zomato's GOV. At this pace, where Blinkit's GOV is growing at 80%+ YoY, we wouldn't be surprised if Blinkit's GOV becomes multiple times larger than Zomato's GOV in overlapping cities, which will more than compensate for the wider geographical footprint of Zomato," the CEO added.