Online food delivery app Zomato will be revealing its financial results on February 8 for the quarter ended on December 31, 2023. As per brokerages, the food delivery platform is expected to post resilient numbers, propelled by heightened demand during festivities, the World Cup event, and an amplified proportion of orders through the Gold program.
Analysts anticipate robust growth for Zomato’s quick commerce division in the upcoming December quarter. Investors will closely monitor projections regarding growth prospects, sustainability of margins, and developments related to Blinkit.
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In the second quarter, Zomato demonstrated significant sequential growth in profits, reaching ₹36 crore. Meanwhile, revenue from operations experienced a remarkable year-on-year surge of 71 percent, totaling ₹2,848 crore.
According to brokerage firm Kotak Institutional Equities, the revenue is likely grow 61 percent year-on-year (YoY). “ We expect 3QFY24 revenue growth to come in at 61% YoY, driven by 45% YoY growth in food delivery revenues (29% YoY growth in GMV and 70 bps yoy take rate expansion), 89% YoY growth in Hyperpure revenues and 106% YoY growth in Blinkit revenues. Our food delivery GMV growth assumption implies 8% sequential growth,” it said.
Zomato raised its platform fee for food delivery services by 33 percent, hiking it from ₹3 to ₹4 per order in key markets effective January 1, 2024. It started levying a convenience fee of ₹2 per order in August 2023, which subsequently rose to ₹3 per order by end of August. The resultant convenience fee (two months) has been one of the drivers of growth of 60bp quarter-to-quarter (QoQ) and 220bp YoY in the take rate (19.4%, excluding delivery charges) in Q2FY24, according to Elara Securities.
“ We believe the uptick in convenience fee per order will play an important role in improving adjusted EBITDA of ZOMATO’s food delivery, which stood at INR 2,040mn in Q2FY24. The total number of orders for the food delivery business stood at 650mn in FY23; we expect orders to reach 830mn in FY25E and 940mn in FY26E. We believe a INR 1 rise in convenience fee across markets will lead to a positive impact of 1.2% in revenue, 30bps in the take rate and 5.3% in adjusted EBITDA of its food delivery business. Since the move (hike from INR 3 to INR 4) has been undertaken in select markets, it may lead to a positive impact of a mere ~0.5-0.6% during FY25-26E food delivery revenue; subsequently, the take rate too would increase 10-15bp each in FY25E and FY26E. We also expect a positive impact of ~2.0-2.5% each in adjusted EBITDA of the food delivery business in FY25E and FY26E, due to the rise in take rates (assuming this is in half of its markets),” the brokerage firm said.
Meanwhile, brokerage company JM Financial projects a sequential GOV growth of 7 percent in food delivery. “ In food delivery, we forecast sequential GOV growth of 7% (+28% YoY) on the back of an expansion in MTUs, ordering frequency, and AOVs. These metrics, in turn, are likely to be supported by the Cricket World Cup and the growing proportion of Gold programme orders,” it said.
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The food delivery segment’s reported revenue growth will be relatively higher than GOV growth due to the likely improvement in the take rates on account of platform fees and improvement in the monetisation of restaurants, according to JM Financial.
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Published: 07 Feb 2024, 10:01 PM IST