Foodtech major Zomato reported its second consecutive profitable quarter today, with profit after tax surging to INR 36 Cr during the September quarter of the financial year 2023-24 (FY24). This was an 18X jump from PAT of INR 2 Cr in the preceding quarter. 

It must be noted that Q1 FY24 was Zomato’s maiden profitable quarter. In Q2 FY23, the company’s net loss stood at INR 251 Cr.

Interestingly, Zomato also posted a profit before tax (PBT) of INR 21 Cr in Q2 FY24, as against a loss of INR 15 Cr in the prior quarter.

Meanwhile, Zomato said its quick commerce business Blinkit also turned contribution positive for the first time in Q2 FY24, which stood at 1.3% in the reported quarter as against negative 7.3% in Q2 FY23.

Zomato’s operating income jumped to INR 2,848 Cr during the quarter under review from INR 1,661 Cr in the year-ago quarter. 

Operating revenue also grew 18% from INR 2,416 Cr in Q1 FY24.

Zomato said its gross order value (GOV) surged 47% year-on-year (YoY) to INR 11,422 Cr in Q2 FY24, with improvement witnessed across business verticals.

Food delivery GOV grew 9% QoQ and 20% YoY to INR 7,980 Cr, and is recovering well from the demand slowdown it witnessed in the last two quarters of FY23, the company said.

Zomato said that the GOV growth in its core food delivery vertical was almost entirely led by growth in order volumes, while the average order value remained largely flat. 

“Order volume growth is typically negatively impacted in this quarter due to lower delivery partner availability during rains. However, this year we were able to improve on that through better all-round execution,” Zomato said in its statement. 

Another key driver of the GOV growth during the quarter was an increasing adoption of its Gold program.

The company said it had 3.8 Mn Gold members till the end of the September quarter, who contributed almost 40% of GOV in its food delivery business. Active Gold members on the platform stood at 2 Mn at the end of June 2023.

However, the contribution margin of its food delivery business grew to 6.6% in Q2FY24 from 6.4% in Q1 FY24.

Zomato saw its consolidated adjusted EBITDA also improve to INR 41 Cr in the reported quarter from a loss of INR 192 Cr in Q2 FY23.

Where Did Zomato Spend?

Zomato’s total expenses surged over 45% YoY and 16.3% sequentially to INR 3,039 Cr in Q2 FY24.

While its spending towards the purchase of stock-in-trade almost doubled to INR 685 Cr in the reported quarter, its employee benefit expenses increased 9.4% YoY to INR 417 Cr.

In the previous quarter, Q1 FY24, Zomato spent INR 338 Cr on employee benefit expense.

Meanwhile, the company also kept spending more towards advertisement and sales promotions, which increased 18.3% YoY to INR 355 Cr.

Zomato’s delivery and related expenses surged over 1.5X YoY to INR 919 Cr in Q2 FY24.

The Outlook

Zomato said it has noticed that festivals drive stronger growth for its quick commerce Blinkit compared to the food delivery business. With major festivals like Navratri, Dussehra, and Diwali coming up in the December quarter, Zomato expects another high growth quarter from Blinkit.

“The festive period in Q3 FY24 is usually a mixed bag for the food delivery business. While people order more around the festivals, at the same time, they also travel and eat-out more in this quarter,” it said.

However, the ICC World Cup should result in additional order volumes but the demand uptick is expected to be limited to a handful of match days, the company added.

Shares of Zomato ended today’s trading session 8.3% higher at INR 116.4 on the BSE today.