How Zomato's Quick Commerce Unit Blinkit Has Fared Since Buyout
Blinkit's share in Zomato's revenue is rising each quarter, and its Ebitda loss is also decreasing quarter on quarter.
It's been a year since Zomato Ltd. acquired Blinkit Commerce Pvt. While revenue of the segment has been growing, operating losses widened. Still, the recent quarterly results and growth of peers underscores the potential Zomato sees in Blinkit.
Zomato had bought Blinkit for Rs 447 crore, in line with its strategy to expand its business segments. Here's how Blinkit has fared since then:
Financial Performance
Zomato's consolidated total revenue has risen 54% to Rs 2,787 crore from Rs 1,811 crore a year ago. Blinkit contributed 14% to the total revenue in Q1 FY24.
The company's quick commerce and hyperpure business segments have been increasing their share in total revenue, as Zomato's food delivery contribution decreased quarter-on-quarter.
The quick commerce segment has been operationally unprofitable. But the financial metrics have been improving quarter-on-quarter. The company's quick commerce segment's Ebitda loss narrowed to Rs 133 crore in the quarter ended June from Rs 203 crore three months prior.
Blinkit's negative contribution to the company's gross order value has been improving. Its adjusted Ebitda, as a percentage of gross order value, stood at -6% in Q1 FY24 compared to -10% in the previous quarter.
While the number of total orders received by the quick commerce segment fell 6% sequentially, the average order value grew 5.79% quarter-on-quarter and 2.34 times year-on-year to Rs 384 in the April-June quarter. The number of dark stores under the company's portfolio also increased to 383 from 377 as of March.
How Peers Are Faring
Private grocery delivery service company Zepto, which is a direct competitor to Blinkit, announced this weekend that it raised $200 million, at a $1.4 billion valuation, making it India's first Unicorn in 2023. The current round was also done at a 55% higher valuation than the company's May 2022 series.
When compared Zepto, Blinkit operates on a larger scale. It handles a daily order volume of 400,000 orders, while Zepto manages 300,000. Blinkit's gross merchandise value and annual recurring revenue are $1.1 billion, exceeding Zepto's $0.7 billion. Moreover, Blinkit's average order value surpasses Zepto's by Rs 90, and it boasts a higher count of dark stores in its supply chain.
What Brokerages Say
Jefferies:
This fundraising signal, combined with Blinkit's recent performance, could pose tailwinds for Zomato's quick commerce segment, said the brokerage on Aug. 26. The brokerage also values Zomato's Blinkit business at Rs 25 per share in the company's fair value, which is 20% of Zomato's target price.
Morgan Stanley
Morgan Stanley remains overweight on Zomato with a target price of Rs 115. Zomato recently rolled out a Rs 2 platform fee per order on its food delivery app for all its users. The brokerage states that if the fee regime sticks, it could drive the company's profitability sooner than expected. The brokerage also projects Zomato's food delivery adjusted Ebitda margin to improve to 4% by FY26.
