While Zomato’s food delivery business posted a nearly 30% year-on-year growth in sales in the October-December quarter, analysts maintain that going ahead its quick-commerce arm Blinkit, will outpace the food delivery business. During the quarter, Blinkit doubled its sales while staying on its path to profitability.
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Analysts are confident that quick commerce is seeing rapid adoption in India, with Blinkit on track to lead this growth. Brokerage firm, Nomura expects Blinkit’s gross order value to be higher than that of the food delivery business by FY28 and its long term profitability to be at par with food delivery segment driven by higher scope for ad monetisation.
To be sure, food delivery is still the largest segment for Zomato by far. In Q3, adjusted revenue from the food delivery segment was Rs 2,025 crore, while revenue from Blinkit was Rs 644 crore. But Blinkit has the advantage of some weakening competitors and a sharp rise in ad monetisation because of high and measurable return on investment for the advertisers.
These have fueled analysts’ expectations who are now factoring in margin expansion and significant growth prospects for both the segments in their forward estimates.
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“We expect Zomato to deliver a strong 70%/41% year-on-year growth in FY24/FY25, with Blinkit outpacing the food delivery business. We remain positive on the long-term growth opportunity for Zomato,” Motilal Oswal said in its report. “Management retained its long-term revenue growth guidance at 40%+ YoY on the back of continued strength in Blinkit performance that will more than compensate the slower growth in food delivery,” it added.
According to Bernstein, Zomato had once again, “raised the bar” and set medium-term growth expectations of around 50% on-year. It said that growth will be led by Blinkit, which has seen impressive acceleration over the past few quarters. Over the past year, Blinkit grew 103%, led by category expansion.
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Analysts will now closely watch Blinkit till the first quarter of FY25 – when the company expects to break-even on the segment. So far, Zomato has managed to post three overall consecutive quarters of profit, but still needs to find a comfortable and competitive pricing for its gold loyalty programme to expand margins further.
