Zomato
is the new steel. It’s not often that a 15-year-old food delivery company dethrones a four-decades-old steel giant from the BSE Sensex, one of the biggest economic indicators in India.
This is India, after all, where steel has been a major industry for a century, but now is Zomato’s turn.
Zomato’s emergence as India’s largest consumer internet company with a market cap of nearly INR 3 Lakh Cr is one of the overarching themes of 2024. And naturally, Zomato’s story has become the benchmark in the Indian startup ecosystem — the question today is not about building a unicorn, but another Zomato.
While the company showed a glimpse of its potential with profitability in 2023, by far, 2024 is arguably the year when Zomato cemented itself as an Indian tech giant. Reporting profits of INR 351 Cr in FY24, Zomato also stayed ahead of its rivals in food delivery and quick commerce businesses (well, except Zepto), while continuing its profitable streak in FY25.
And we also got another look at Zomato founder and CEO Deepinder Goyal’s unconventional approach towards understanding the operations as well as key hiring — not to mention, several TV appearances.
Industry watchers, brokerages maintain their optimism on Zomato in 2025 with two major verticals (food delivery and quick commerce) already profitable and the company well capitalized with an INR 8,500 Cr Qualified Institutional Placement round recently.
The year ahead, however, will test Zomato again. With a few bold experiments in the pipeline for District and perhaps even for other services, Zomato finds itself in a different place than 2023.
Now, Swiggy is also a public company and the pressure from its biggest rival will not exactly be easy to deal with. Plus, Zepto has stepped up the revenue pressure on the quick commerce front.
So even as we review Zomato’s year gone by — as part of our 2024 in Review series — this is as much a preview of 2025 for the delivery giant.
The Next Stop For Zomato Food Delivery
Food delivery has always been the core revenue driver for Zomato, and this year, the company managed to outpace rival Swiggy in terms of market share and profits. More than half of Zomato’s revenue in FY24 came from food delivery, and this trend is unlikely to change in the next year.
Despite some headwinds, Zomato sits pretty on the top of the food delivery market of India grabbing a 58% market share according to a report by Motilal Oswal. Notably Motilal Oswal’s fund was a lead investor in Zomato’s recent $1 Bn QIP funds raise.
But while market share has grown, the user base and order volume have not exactly kept pace. Zomato focused on improving the margins on food delivery by increasing platform fees, pushing partners for more ads, commissions on restaurant partners and reducing delivery costs.
As per a note by Elara Capital, Zomato’s food delivery business growth over the last three quarters was slowest at 21.4% YoY with 30% revenue growth because of stagnation in take rates.
But margins on GOV went up to 3.5% in Q2 FY25 from 2.6% in Q2 FY24, showing that the company has managed to improve its unit economics even though growth has remained lacklustre.
Karan Taurani of Elara Capital believes the key forward will be to increase the number of monthly transacting consumers and increase the frequency of orders on the platform. He sees the margins on food delivery business stabilizing at 4-5%. “If at all Zomato further increases its platform fees further that can improve the profitability, however the company has not implemented the hike in platform fees across all Indian cities which could be a deterrent,” Taurani added.
Will Blinkit Boom Continue?
Even if Deepinder Goyal faced criticism for Blinkit’s costly acquisition, no one has any doubts now.
The highlight of Blinkit’s success in 2024 was a substantial increase in revenues which is adding to Zomato’s revenues, however the quick commerce business is yet to achieve net profitability. And competition is only growing in the quick commerce space, making it much harder for Zomato to continue to press forward in the same manner as late 2023 and early 2024.
Blinkit revenue grew by 129% YoY in Q2 FY25 reaching INR 1,156 Cr, which is just about half of what the company reported in all of FY24. That’s the pace at which quick commerce is growing.
However, the fact that a four year old Zepto has outpaced Blinkit would possibly be a big red flag for investors. The questions on Zomato shareholders’ minds will be split between Blinkit’s profitability and the revenue growth. Balancing both will be a tricky challenge for Blinkit CEO Albinder Dhindsa and Zomato’s Goyal.
An analysis of Zomato’s FY24 annual report and Zomato’s management commentary during the recent earnings call reveals that Blinkit revenue growth has been driven by substantial increase in GOV, just like in the old days of food delivery. How long can this momentum be sustained before Blinkit hits a growth wall in 2025 — whether due to competition or due to a saturated market.
Instead, Zomato and Blinkit are now focused on building the quick commerce business through introduction of more categories, assortments with increase in profitability. The recent launch of Blinkit Bistro is one example of how Zomato is pushing for this change, but again, these are experiments that may not pay off for Blinkit.
Despite so much bullishness around quick commerce, Blinkit is in a precarious position of being the middle of the pack. It cannot rest easy for a number of years and will have to continue to invest heavily for growth and market share. For instance, as per Zomato’s admission, the gross order value in Delhi-NCR has fallen from 47% to 40% because of the entry of new competitors.
Currently, Blinkit has dark stores across 40 locations in the country. Zomato management said that expanding this to more cities will be margin dilutive in the medium term.
In terms of its planning of dark stores expansion, Zomato management said that it will focus on owning only a few stores whereas the rest will be operated on a franchise basis, which could relieve some cost pressure, but there is a risk of execution failure.
Even as Blinkit managed to ride the hype wave for most of the year, the end of the year has not been very rosy for the quick commerce giant, especially with everyone having their eyes on the 10-minute delivery race.
Hyperpure: Zomato’s Silent Performer
On the other hand, Zomato’s B2B supplies vertical Hyperpure has little competition to be worried about and a captive network of customers. Revenue has nearly doubled every year, strongly adding to Zomato’s topline.
In Q2 FY25, Hyperpure’s revenues grew by 17% QoQ to INR 1,473 Cr, whereas adjusted EBITDA loss was INR 21 Cr. The vertical is on the brink of profitability and will see further investments from Zomato for food processing and manufacturing plants.
These could be the lynchpins for Zomato’s push into private labels for HoReCa customers in the future. Market analysts say that the revenues of Hyperpure have grown steadily particularly after Blinkit acquisition since Zomato is also supplying raw materials to retailers and Blinkit sellers.
“Zomato’s own delivery fleets coupled with building infrastructures in densely populated geographies where Blinkit demand is coming from will also grow its Hyperpure business. Furthermore, the businesses partnering with Hyperpure are offered incentives, given preferences to list on Zomato platforms just like the eateries/ restaurants Zomato was earlier partnering with,” commented an FMCG wholesale distributor based in Bengaluru.
Notably, Zomato CEO Goyal had said earlier that Hyperpure’s extension of service to Blinkit is a key revenue opportunity for the future. However, industry watchers are skeptical whether supplying to grocery and non-grocery retailers will be as profitable as supplying to restaurant partners because the latter is a low-margin business with less AOV.
Plus, with the changing mix of categories on Blinkit, how much will Hyperpure have to change from its food-first approach to non-food categories?
District Makes An Entry
If your interest in live musicals, concerts and comedy shows has peaked in the last one year, Zomato may be partly responsible for the same.
It is no secret Goyal is going aggressive on the going-out business and challenging the market leader BookMyShow. Acquiring Paytm Insider for INR 2,048 Cr is a pretty big signal. But if anyone doubts Zomato’s ability to make that seem like a paltry amount, just look at Blinkit.
“It has become crucial for any consumer internet company to diversify its revenue streams and Zomato is building up on the same. Zomato’s target market comprises mostly millennials and GenZ Indians, and now besides food and daily needs, the company is also catering to entertainment and activities. We will see a lot of overlapping consumers who will use one or all these apps.This Zomato universe will be tough to challenge especially by any one vertical specific company/ business because of the massive consumer base Zomato has,” a Gurugram-based events company. manager told Inc42.
A March 2024 EY-FICCI reportt claims the live events and ticketing business in India grew by 20% in 2023 to reach a market size of INR 8,800 Cr and is expected to touch INR 14,700 Cr by 2026.
Analysts say that while there are only two big online competitors right now in the business, the offline events management and marketing companies will also be up for M&As and there is a likelihood of other consumer internet companies entering the space just like Zomato did.
Taking on its arch rival, Swiggy has also rolled out Scenes, a section within its app to cater to ticketing and events booking. The company is also focussing on managing its own set of events for Scenes as well as its Rare Life membership club.
By this time next year, we might well be talking about the going out verticals with the same heightened revenue expectations of quick commerce.
Zomato’s Brave New World
Three years after its listing, the Zomato we know today is totally different from the one that public markets investors backed in the IPO. At that time, Zomato was just purely food delivery, trying other things. In 2024, those experiments have matured and bloomed.
In the next two years, it tried grocery but couldn’t hack it and instead acquired Blinkit in 2022. It tried nutraceuticals and 10-minute food delivery, but that didn’t go anywhere. Now in late 2024, instant food delivery is part of Blinkit, and perhaps a lot more fleshed out than before.
One could even say the timing for this product launch is better than when Zomato first tried it in early 2022.
Another example is District, which is an extension of Zomato’s first event Zomaland in 2018. This pre-IPO push for the Zomato brand gives us a clue as to what Zomato is planning with District. The first Zomaland seemed like any other event, but with District, Zomato will look at the possibility of scaling this up even more efficiently.
The one big curveball for Zomato is the potential changes to the quick commerce game due to regulations, and concerns around the impact on small retailers. As the market matures and the regulations evolve,
Zomato will have to carve out new ways to balance the surging profits and the concerns of the regulators.
After all, it would want to maintain the position it gained in 2024 — becoming India’s largest publicly listed consumer internet company.
Edited By Nikhil Subramaniam