Goyal added that the business increased its market share in both the most recent quarter and the prior fiscal year (FY23).
Deepinder Goyal, co-founder and CEO of Zomato, stated that the company aims to attain group-level profitability in four quarters, including the rapid commerce arm Blinkit. He wrote in his letter to shareholders that the company will reach its goals by increasing earnings in the food delivery industry and decreasing losses in Blinkit.
According to Goyal, the company’s operations, excluding fast commerce, became “adjusted Ebitda positive” in the March quarter, which means that, excluding certain non-cash items and one-time charges, operating earnings now exceed operating expenses.
“I would give our current level of confidence (in terms of group-level profitability) a 9 out of 10 rating.”We have significantly increased our margins in the food delivery business over the past five quarters, further solidifying our market position. We will keep thinking in the same way as we work to increase the Adjusted EBITDA margin (from the current 1.2 percent) to our stated goal of +4-5 percent of Gross Order Value (GOV), which would translate to Rs 1,000 to Rs 1,300 crores of annual cash operating profit at the current scale of the food delivery business,’ he wrote.
From Rs 346.60 crore in the December quarter to Rs 359.70 crore in the same quarter last year, the company’s losses for the March quarter decreased to Rs 188.20 crore. In comparison to the same quarter last year, revenue for the quarter increased by 69.66% to Rs 2,056 crore from Rs 1,211.80 crore.
Over 65% of the government’s gross domestic product (GOV) in the month of March 2023 came from retailers with a positive contribution margin, and some of those stores had a contribution margin of over 5%. The revenue loss caused by reduced AOVs was somewhat mitigated on the revenue side by improved ad monetisation and higher customer delivery charges.
On the cost side, better throughput per dark store and replenishment efficiency (warehousing and middle mile) pushed down the cost per order (operational leverage)…. We believe we are the most cost efficient and largest rapid commerce firm in India today,” he wrote in his letter.
During the quarter, Zomato Gold membership grew to 1.8 million members, and orders from Zomato Gold members (with free delivery) accounted for up to 30% of total GOV in March of this year. According to the notice, the order frequency of these clients has increased by 60% on average since becoming members.
Goyal stated that despite his company’s investments in extending the delivery radius, delivery prices have not much decreased over the past year. He attributed this to factors like inflation.
According to the letter, a decrease in demand between late October and the end of January had a negative impact on its quarterly growth. A recovery that began in February 2023 is anticipated to result in increased quarter-over-quarter (QoQ) government growth in the first quarter of FY24, which is anticipated to be in the upper single digits. The overall industry downturn and additional elements like a shorter February and brief closures in several cities had a negative influence on growth, but after adjusting for these elements, QoQ GOV growth in Q4FY23 would have been 0.8% rather than a loss of 1.7%, the author concluded.
Goyal said that the business increased its share of the market in both the most recent quarter and the prior fiscal year (FY23).