Zomato, its first full-year profit in pocket, turns focus on Blinkit

Food-delivery company Zomato Ltd, which has turned in its first full-year profit, is now doubling down on its rapidly growing quick-commerce business Blinkit, aiming to add 100 dark stores by June. 

By the end of this financial year, Zomato is targeting 1,000 warehouses for Blinkit, which the company said turned operationally profitable in March, as both revenue and gross order value doubled during the fourth quarter. GOV is a key metric for delivery companies, measuring the money earned on each trip.

Blinkit’s rising prominence within the Zomato ecosystem—which includes Hyperpure, another growth driver for the company—isn’t surprising. In March, co-founder and chief executive officer Deepinder Goyal had said he expected Blinkit, which Zomato acquired in June 2022, to become larger than the core food-delivery business over the next year.

“We are just grateful that the bet that we took on Blinkit worked out just fine and we are not at a point where Akshant (Goyal, chief financial officer) and I are getting fired for an expensive acquisition gone wrong,” Goyal said on Monday while announcing Zomato’s first full-year profit.

Also read | Zomato's recipe for success: Blinkit's performance steals the spotlight 

Rapid expansion

Zomato added about 75 Blinkit stores between January and March, taking its total count of warehouses to 526, as the quick-commerce business strives to get closer to frequent buyers to capitalise on customers who’ve grown accustomed to instant delivery of daily household essentials.

“While we have a presence in 26 cities, the focus from an expansion standpoint is the top eight cities in India,” said Albinder Dhindsa, founder and CEO of Blinkit, which was previously known as Grofers. “Of the new stores that we opened in (the fourth quarter), 80% are in these top eight cities.”

And yet, Dhindra said, Blinkit lacked a meaningful presence in the top cities. 

“Our second largest city Bengaluru is less than 30% of Delhi NCR’s GOV, with a similar gap in store count. The job for us over the next few quarters is to get Bengaluru and other large cities like Mumbai and Hyderabad to the penetration of Delhi NCR, both in terms of store footprint and GOV,” Dhindsa said. “This alone will lead to about a 4x increase in our GOV.”

First full-year profit

Blinkit’s gross order value surged 97% in the March quarter, with revenue more than doubling from a year earlier to ₹769 crore. Blinkit also turned profitable on an adjusted ebitda-basis in March, the company said. 

For the fourth quarter, however, Blinkit had adjusted ebitda number for the quarter was a loss of ₹37 crores for the quick commerce unit

“Zomato’s commentary shows it is aggressive on quick-commerce growth, which could result in a valuation multiple re-rating,” said Karan Taurani, research analyst at Elara Capital. “The food business is already trading at a rich valuation and is expected to continue.”

Also read | Zomato lands in a sweet spot after remarkable recovery

Overall, Zomato swung to a profit of ₹175 crore in the March quarter from a loss of ₹188 crore in the corresponding year-earlier period, as revenue from operations improved to ₹3,582 crore from ₹2,058 crore. For the full 2023-24 financial year, Zomato posted a profit of ₹351 crore as compared with a loss of ₹971 crore in the year before.

Zomato’s shares, however, ended Monday’s trading 2.3% lower at ₹196.65 on NSE, as its quarterly profit had fallen short of the ₹187 crore that analysts polled by Bloomberg had expected. 

Shades and suitcases in minutes

Blinkit’s main rivals, Swiggy’s Instamart and Zepto, too, have benefitted from the increasing demand for quick delivery of daily items, and have expanded their product catalogues to include beauty, fashion, and electronics, in addition to groceries.

Zomato has similar plans for Blinkit. In recent weeks, Blinkit has expanded its use cases through partnerships with companies such as Lenskart and Mokobara, which promise delivery of items such as eyewear and luggages, respectively, in a span of 10-15 minutes.

Blinkit’s average delivery time in March was 12.5 minutes.

With additional inputs from Sowmya R