Zomato Expects Losses To Continue While Quick-Commerce Competition Brakes Blinkit Margin

Food aggregator giant Zomato Ltd. expects losses to continue in the near term after reporting a 30% decline in net profit that missed analysts' estimates.

"As we continue to bring forward store expansion, our networks may have to carry a greater load of under-utilised stores, which will impact near-term profits in the next one or two quarters," Zomato said in a post-earnings letter to its shareholders.

These investments will also likely result in gross order-value growth remaining above 100% for fiscals 2025 and 2026, the letter added.

While the Gurugram-based food-to-events company saw an expanding top line, it said that it is currently going through a broad-based slowdown in demand which started during the second half of November.

"Once we come out from this period of expansion, the business is likely to turn sharply from being loss-making to becoming meaningfully profitable," Chief Financial Officer Akshant Goyal said in the letter.

Zomato attributed the quarterly increase in its depreciation costs to a higher capital expenditure. The company expects quarterly capex to stay elevated at current levels for the next few quarters. "As mentioned earlier, we expect the steady-state impact of depreciation to be about 0.5-1% of GOV," Blinkit co-founder Albinder Dhindsa said.

Dhindsa highlighted that a heightened competition in the quick commerce space has led to an expected pause in Blinkit's margin expansion. "So far, we have not seen any attrition of our core customers, which tells us that customers are continuing to choose Blinkit over other options," he said.

Zomato has also said that it aims to have 2,000 Blinkit stores by Deccember 2025, one year ahead of its earlier guidance.

Commenting on the 10-minute delivery race, Dhindsa added: "Data has shown us time and again that bringing down delivery time creates incremental demand for restaurant food."

Dhindsa cited this as the reason why Zomato experimented with Zomato Instant, an offering that shut down within a year as the company could not find the right economic model.

"Our learning here was that 10-minute deliveries would be possible only if we ensure kitchen networks are dense (and thereby cut down travel time), while also bringing down kitchen preparation time. Doing this consistently and profitably is not an easy problem to solve," he added.

Commenting on Bistro's business model, Dhindsa also said that if the company manages to find product-market fit and profitability, it hopes that this platform could be replicated by different restaurants and cuisine types where demand exists.