Summary:
- Zomato’s shares dropped 5.05% to INR 203.80, marking a 12% decline over the past week and trading 31% below its 52-week high. The slump follows disappointing Q3 FY25 results, with a 57.2% YoY drop in net profit and slower-than-expected growth in the core food delivery business.
- Mounting losses in the quick commerce arm Blinkit, intensified by rising competition from Swiggy and Zepto, have further pressured Zomato. The company’s efforts to introduce faster delivery services are yet to show significant results, raising concerns among investors.
A Week of Losses for Zomato Stock
Shares of Zomato continued their slide today, dropping 5.05% to hit an intraday low of INR 203.80 on the Bombay Stock Exchange (BSE). This marks the fourth consecutive day of losses for the food delivery giant. At the time of writing, the stock had partially recovered to INR 210.25, still down 1.05% from the previous close.
The market capitalization of Zomato currently stands at INR 2,02,898.62 Cr (approximately $23.44 billion). Over the past five trading sessions, Zomato’s share price has fallen more than 12%, adding to investor concerns. The stock is now trading 31% below its 52-week high of INR 304.50, a stark contrast to its earlier momentum.
Q3 FY25 Financial Results Disappoint Investors
Zomato’s recent financial results for the quarter ended December 31, 2024, have been a major factor behind the stock’s recent decline. The company reported a 57.2% year-on-year (YoY) drop in consolidated net profit, which stood at INR 59 Cr compared to INR 138 Cr in Q3 FY24. Sequentially, the decline was sharper, with profits tumbling 66% from INR 176 Cr in the previous quarter (Q2 FY25).
On the revenue front, Zomato showed strong growth, with operating revenue surging 64% YoY to INR 5,405 Cr, thanks to expanding operations. However, the company’s core food delivery business exhibited signs of slowing growth. The Gross Order Value (GOV) increased by only 17% YoY to INR 9,913 Cr, missing its internal target of 20%+ growth.
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Quick Commerce Unit Blinkit Adds to Woes
Zomato’s quick commerce arm, Blinkit, has been another source of concern. Blinkit’s adjusted EBITDA losses surged over 13 times, growing from INR 8 Cr in Q2 FY25 to INR 103 Cr in Q3 FY25. These mounting losses have been attributed to rising competition and increased investments in dark store expansions.
The quick commerce sector is seeing fierce competition, with multiple players vying for dominance. ICICI Securities analysts noted that Zomato may have lost market share in food delivery, especially as competitors introduced faster delivery options, such as 10-15 minute services, which have gained traction among customers.
Rising Competition Poses Challenges
Zomato’s CFO, Akshant Goyal, addressed the growing competition during the company’s earnings call, stating:
“I don’t think any of this has so far had a material impact on Zomato’s restaurant aggregation food business. Any form of 10-minute delivery is at a very early stage and will not move the needle at all, even if you put it together.”
Despite Goyal’s reassurances, Zomato has rolled out its own 15-minute delivery service on the app and introduced a 10-minute delivery service under Blinkit, called ‘Bistro.’ However, rivals Swiggy (Bolt & SNACC) and Zepto (Zepto Cafe) have also launched similar services, intensifying the competition.
What Lies Ahead for Zomato?
Zomato’s struggle to maintain growth in its core business while managing rising costs in quick commerce paints a challenging picture. While its 64% revenue growth highlights strong operational expansion, the slowdown in food delivery growth and significant losses in Blinkit raise concerns about sustainability.
The market will be watching how Zomato navigates these challenges in the coming months. Investors are likely to remain cautious as the company balances its ambitious growth strategy with the need to control costs and address competition. For Zomato, innovation, operational efficiency, and market share retention will be key to reversing its stock’s downward trajectory.
Key Takeaways:
- Zomato’s stock has fallen 12% over the past five trading sessions and is now 31% below its 52-week high.
- Consolidated net profit for Q3 FY25 dropped 57.2% YoY to INR 59 Cr.
- Core food delivery business growth slowed to 17% YoY, below the 20%+ target.
- Blinkit reported a 13x surge in adjusted EBITDA losses amid rising competition.
- Zomato faces stiff competition from Swiggy, Zepto, and other players in quick commerce.
Zomato’s future performance will depend heavily on its ability to adapt to market challenges while delivering consistent growth in both its core and ancillary businesses.