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Pit-stop in a marathon

Zomato’s (ZOMATO IN) Q3 performance was a mixed bag. GMV for Food Delivery grew at subdued 16.8% YoY owing to a slowdown. Take rates were at 20.9% (up 14bp QoQ) and adjusted EBITDA (as a percentage of GOV) was resilient at 4.3% (up 75bps QoQ). In the quick commerce (QC) space, Blinkit aims to have 2,000 stores by CY25, instead of CY26 earlier (from 1,007 as at end-Q3), which could hit the recent improvement in profitability. Overall, festival season-led demand pushed average order value (AOV) for QC to a healthy INR 707, with GMV up 120% YoY. We downgrade FY26E/27E EPS estimates by 8.9/5.4% given rapid expansion and delayed profitability in the quick commerce segment. So, we pare our TP to INR 300 (from INR 320) – Maintain BUY.

Food Delivery – Blip in GMV; efficiency up: Food Delivery’s performance in Q3 was slightly below estimated. Slowdown from November mid pushed GMV growth below twenties (grew 16.8% YoY), however, this could be temporary departure from the long-term guidance of 20% YoY. Expect GMV to grow, led by increasing frequency and AOV. But take rates at 20.9% continued to grow (+ 82bps YoY and 14bps QOQ) due to an increase in platform fee and better ad revenue. In Food Delivery, ZOMATO has guided for adjusted EBITDA (as a percentage of GOV) of 5.0% in the near term versus 4.3% in Q3 (up 130bps YoY) and showed resilience due to lower fixed costs, resulting in better efficiencies. The 15-minute food delivery proposition is set to enhance user experience as regards delivery time.

Blinkit – Profitability delayed; store addition aggressive: A 120% YoY GMV growth for Blinkit was backed by store additions at 556 YoY (216 in Q3). Active dark store count was 1,007 in Q3 and is set to double by end-CY25 as ZOMATO has planned for a year ahead. So far, 60% of expansion was in top-eight cities, and densification of the network will improve service. About 20% of expansion was in the form of incremental stores was beyond top-eight cities. Festivals spiked traction in electronics and GMA propped AOV to INR 707 (7.01% QoQ), though take rates pared 91bps QoQ due to seasonality. Blinkit continues to maintain its GMV market share via healthy consumer retention despite elevated competition, this was led by focus on service, though at elevated A&P. High immature store penetration due to aggressive expansion hit adjusted EBITDA (percentage GOV) with loss at 1.32% (average loss of 0.37% in past three quarters). Doubling of store network may further delay profitability. Monitor the scale and growth of beyond tier-I for profitability

Maintain Buy; TP pared to INR 300: Strained Q3 earnings were led by losses in quick commerce and slower GMV growth in Food Delivery. Per ZOMATO, aggressive store addition in quick commerce may lead to losses therein. Blinkit GMV CAGR is estimated to remain strong at 96% through FY24-27E led by higher store network. We also raise FD adjusted EBITDA estimates to 5.0% (FY27E). We do not expect quick commerce to be hit much by the entry of e-commerce, as both will coexist due to niche propositions. We maintain BUY with TP pared to INR 300 from INR 320, as we roll over to FY27E from Dec26E, valuing Food Delivery at 55x EV/EBITDA, and Hyperpure/Going Out at 3x/3x EV/sales respectively. We pare Blinkit’s multiple to 4x (from 6x) due to delayed profitability amid increased competition.

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