“Zomato’s 15% loss in value in less than a day has a lot to do with profit margins hit in the high-growth q-commerce,” wrote Aviral Bhatnagar, founder and managing partner of AJVC.
His statement highlights the growing pressures Zomato is facing, particularly through its fast commerce arm, Blinkit.
As Bhatnagar said: “Q-commerce has started to become extremely fierce and this is reflected in Blinkit’s profit margins. High-growth companies swing back and forth in terms of earnings growth or failure.
The sharp decline in Zomato shares reflects the challenges of balancing aggressive expansion and profitability.
Blinkit recorded an impressive 27.2% increase in gross order value (GOV) in Q3FY25, reaching a staggering annualized run rate of ₹31,000 crore. Yet the costs of this growth are evident, with EBITDAM plunging to -1.3% from -0.1% in the second quarter, largely due to accelerated store openings and higher retail spending. customer acquisition.
The fast commerce business added 216 stores this quarter, surpassing the 1,000 store mark. Blinkit management is now targeting 2,000 stores by December 2025, a year ahead of schedule. Analysts like Nuvama suggest that this expansion could “hurt profitability in the short term, but will ultimately lead to increased profitability in future quarters as these stores mature.”
Zomato’s core food delivery business also faced headwinds, with GOV growth of 2.3% quarter-on-quarter, reflecting a broad-based slowdown. Company management acknowledged weaker demand since November, but noted steady improvement in contribution margins.
Zomato’s B2B business, Hyperpure, continues to grow efficiently. With EBITDA margins close to break-even, this segment remains a key contributor, highlighting Zomato’s ability to diversify beyond food delivery.
To reduce reliance on food delivery, Zomato has entered the entertainment space with a new app targeting event and cinema ticketing. With ambitions to rival BookMyShow’s 60% market share, the move reflects the company’s commitment to creating a broader ecosystem.
Global brokerages have slashed Zomato’s target prices, with Macquarie setting a minimum of ₹130. Analysts warn that growing competition in q-commerce and rising digital marketing costs could further weigh on margins, despite promising long-term growth potential.
