Zomato Is The New Treasury Trader In Town

A closer look shows that Zomato earned nearly Rs 400 crore from net gains from mutual funds, interest income from government securities, interest on debentures or bonds, and interest from bank deposits. That is nearly 8% of the company's revenue and close to Rs 1,600 crore on an annualised revenue of Rs 20,500 crore, based on Q2 revenue. This made up the food delivery player's profits coming from treasury operations.

Interest from debentures or bonds accounted for Rs 219 crore during the quarter. At the end of the quarter net cash increased by Rs 66 crore for the company.

On a standalone basis, the company earned Rs 269 crore in other income, that is, 12.50% of the standalone revenue. It invested Rs 2,391 crore during the six-month period ending September 2024. It’s key subsidiaries Hyperpure has accumulated losses of Rs 707 crore, while Blinkit carries accumulated losses of Rs 1,696 crore for the period between Aug. 1, 2022, to Sept. 30, 2024.

Zomato is sitting on Rs 10,800 crore in cash, which has come down from Rs 14,400 crore. The decline is led by investment in the quick commerce business and net investment of Rs 2,014 crore to acquire Paytm's entertainment business, which included a goodwill of Rs 1,020 crore. This business will also need further investment.

The company is proposing to raise up to Rs 8,500 crore in equity fund raise through a qualified institutional process. The company said it needs to enhance cash balances, given competitive landscape and maintain level playing field with competitors who continue to raise further capital.

It's competitor Swiggy Ltd. is in the process of raising funds through IPO and Zepto is looking to raise cash in fresh round of funding.

As quick commerce disrupts traditional food and grocery channels, there is increased competition and no win in this segment. Blinkit is now competing with Instamart, BBNow, Zepto, Flipkart Minutes and JioMart.

The jump in revenues is from Hyperpure, its B2B business, and quick commerce revenues, which rose over 22% sequentially in the second quarter.

Quick commerce is now clocking over Rs 1,100 crore in quarterly revenue that's nearly a quarter of Zomato's quarter revenue.

Hyperpure which contributed Rs 1,473 crore or nearly 31% of the revenue in Q2 continues to be loss making at EBIT level. Trade receivables, though, for this segment increased to Rs 1,375 crore for six-month period ending September, compared to Rs 794 crore for the same period in the previous fiscal.

The food delivery EBIT rose 8.7%, compared to 3.6% revenue growth sequentially, thereby improving the margins by 80 bps to 17.3%.

The quick commerce business saw its EBIT margin contract by 30 bps to 4.2%, led by high costs of setting up dark stores that rose by over 150 during the quarter. The company has guided for further pressure on the margins, given increased competition and store expansion plans. Zomato plans to increase store count to 1,000 by March 2025.