Zomato Q4 Results: ONDC To Full Profitability — Key Takeaways

Zomato Ltd.'s fourth-quarter net loss narrowed, beating analyst estimates.

The company's net loss narrowed to Rs 188.2 crore as the Gurugram-headquartered food delivery major turned adjusted Ebitda positive, excluding its quick commerce acquisition, Blinkit. That compares with a Bloomberg forecast of Rs 361.6 crore in losses.

Here's where the company stands on the other metrics:

Chief Executive Officer Deepinder Goyal said the next aim for Zomato is to be profitable on a consolidated basis—including quick commerce—within the next four quarters. "We're aiming to get there by increasing profits in the food delivery business and reducing losses in the quick commerce (Blinkit) business."

Goyal said his confidence level about being profitable in the next four quarters is "9/10". With Blinkit, there is still a long way to go in terms of margin improvement, he said.

In March, more than 65% of the gross order value was from contribution-positive stores. "A few stores have even crossed 5% contribution margin and we expect that to be the case across the mature parts of our network at some point in the future," he said. "We believe we are the most cost-efficient and the largest quick commerce business in India today."

Goyal said the launch of Zomato Gold did not affect Zomato's overall profitability timeline.

In the shareholders' letter, Goyal said Zomato Gold membership base scaled to 18 lakh members during the quarter. While that had some negative impact on Zomato's contribution margin, it was compensated for by progress across other revenue and cost levers, he said.

Goyal acknowledged the Open Network for Digital Commerce, but didn't mention much about it in the shareholders' letters.

The government-backed ONDC has been termed a challenger in food delivery to Zomato and Swiggy's duopoly in the country, with its lesser commission rates.

"At Zomato, we welcome all innovations that could help the restaurant industry in India grow," Goyal said. "We continue to watch the ONDC progress closely and learn from it."

Goyal said quarterly growth in food delivery was low in Q4 because of the demand slowdown from last October till January.

"As we had mentioned in our last letter, we had started seeing green shoots of recovery in the first week of February 2023," he said. "That recovery has continued and the business has grown well since then and the same should reflect in better gross order value growth in the next quarter."

There were two other factors that impacted growth in the quarter:

• February, being a shorter month, had a negative 2.2% impact.

• Shutdown of food delivery services in as many as 225 cities in January, which had a negative 0.3% impact.

Zomato gained market share in the last quarter and also in fiscal 2023, he said.

On the topic of offering home services similar to those of Urban Company, Goyal said Zomato runs multiple small experiments to find ways in which local economies can benefit from technology.

Home services is one such experiment where the firm is exploring whether it can make its neighbourhood services, like electricians and plumbers, more accessible to customers, according to Goyal. "At this point, this is not a big decision at our end," he said. "We will keep you updated on the progress here, if any."

Goyal confirmed that Zomato was exploring this space after reports of him resigning from Urban Company's board surfaced. "If, at all, we end up competing with Urban Company at a large scale, we know we are up against a formidable team and a very high quality business."