Zomato: Turning towards profitability

GoCrackIt Originals: Current Business Problem

Case ID: GCICBP| Tomato + Profitability | 221 | 16th Mar 2024

©2024 This case is written by Suhruta Kulkarni, Co-Founder, GoCrackIt & Junaid K, GoCrackIt and as the  basis for class discussion & education rather than to illustrate either effective or in effective handling of any  entity/ management. This case can not be copied and circulated without the explicit permission of GoCrackIt.

Zomato, India’s top food delivery app, recently made history by earning its first-ever consolidated  net profit of ₹2 crore in the first quarter of fiscal year 2024 (Q1FY24) and which continued to grow  to ₹138 crore in Q3FY24 . It took the company 15 years to achieve this milestone despite facing 1 tough challenges like rising food prices and lower consumer spending. However, Zomato managed  to overcome these hurdles by changing its business approach and expanding its services. 

About Zomato

Founded in 2008, Zomato started as an online restaurant discovery platform and has since evolved  into a comprehensive ecosystem offering food delivery, quick commerce (Blinkit), B2B supplies  (Hyperpure), and Dining Out experiences. The company turned public in July 2021 with a  valuation of USD 12 Bn and was subscribed 35 times. , facing fluctuations in share prices but 2 regained momentum with its profitability milestones in Q1 FY24. (Exhibit 1) 

Zomato's Journey to Profitability

Zomato has successfully navigated towards profitability through several strategic moves. Firstly,  the company diversified its revenue streams by expanding into various sectors, such as a food  marketplace platform, Hyperpure B2B supplies, and Blinkit quick commerce . This diversification 3 reduced reliance on any single segment, ensuring stable income. The segments other than food  market place are yet to deliver profitability, but have been seeing steadily decreasing losses.  Secondly, Zomato implemented cost-cutting measures like adjusting commission rates, optimizing  delivery partner payments, and exiting underperforming markets. These actions enhanced  operational efficiency and improved profit margins. Even at Blinkit, stores have been concentrated  only in 8 cities. Additionally, Zomato prioritized a customer-centric approach, evident in initiatives  like the Zomato Gold loyalty program and the “On Time Guarantee” feature. By focusing on  customer satisfaction and loyalty, Zomato drove revenue growth. 

Challenges and Future Outlook

While Zomato celebrates its profitability, challenges remain, including competitive pressures,  rising expenses, and the need to sustain growth momentum. The company must continue to  innovate, optimize costs, and focus on customer satisfaction to maintain its competitive edge in the  dynamic foodtech landscape. Additionally, Zomato’s strategic expansion into new verticals and its  commitment to operational excellence position it well for continued growth and profitability in the  future. 

Questions

  1. Analyse the key factors that contributed to Zomato’s path to profitability. How did the  company overcome the various challenges it faced? 
  2. Evaluate the role of Zomato’s diversification strategy, including the acquisition of Blinkit  and the launch of Hyperpure, in supporting the company’s overall profitability. 

  3. Discuss Zomato’s value proposition and unique selling points compared to other food  delivery companies in India. How does the company’s differentiation strategy help it  maintain a competitive edge? 
  4. Assess the long-term sustainability of Zomato’s profitability. What are the key risks and  challenges the company may face, and how can it continue to maintain its profitability  going forward? 

1 https://entrackr.com/2024/02/zomato-posts-rs-3288-cr-revenue-and-rs-138-cr-profit-in-q3-fy24/ 2 https://hbr.org/2021/08/what-zomatos-12-billion-ipo-says-about-tech-companies-today 

3 https://www.zomato.com/

  1. https://economictimes.indiatimes.com/tech/startups/zomato-management-expects-profitability-to-sustain-after-first-ever-quarterly-pat/ articleshow/102392242.cms 
  2. https://startup.outlookindia.com/analysis/is-zomato-s-profitable-quarter-a-flash-in-the-pan–news-9558

Exhibit 1 : Zomato’s Revenue & EBITDA BreakUp

Food  

Delivery

Detail 

Revenue 

Q3FY23 

1565 

Q4FY23 

1530 

Q1FY24 

1742 

Q2FY24 

1925 

Q3FY24 

2025

EBITDA 

23 

78 

181 

204 

252

HyperPu re

Revenue 

421 

478 

617 

745 

859

EBITDA 

-53 

-45 

-35 

-34 

-34

BlinkIt

Revenue 

301 

363 

384 

505 

644

EBITDA 

-227 

-203 

-133 

-125 

-89

Dining &  Out

Revenue 

58 

41 

42 

49 

73

EBITDA 

-7 

-2 

1

Others

Revenue 

17 

8

EBITDA 

-2 

-3 

-4 

-5 

-5

Consolid ated

Revenue 

2362 

2414 

2786 

3227 

3609

EBITDA 

-266 

-175 

12 

41 

125

Source : https://www.zomato.com/investor-relations/financials 

Source : GoCrackIt Analysis

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