Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zomato Ltd (BOM:543320, Financial) reported impressive year-on-year growth of 27-28% in the food delivery business, indicating strong demand.
- The company has managed to expand margins while continuing to invest in growth and long-term platform health.
- Zomato Ltd (BOM:543320) plans to open 2,000 dark stores by March 2026, showing confidence in scaling its quick commerce business.
- The company has successfully implemented a platform fee in food delivery, which could potentially increase revenue without significantly affecting volume growth.
- Zomato Ltd (BOM:543320) has a strong balance sheet and is not considering distributing cash to shareholders, indicating a focus on long-term growth and stability.
Negative Points
- The company faces challenges in predicting short-term profitability due to variables like competition and market conditions.
- There is uncertainty regarding the impact of potential social security benefits for delivery partners on margins.
- The quick commerce business may face inefficiencies and increased competition as it scales up, potentially affecting profitability.
- The implementation of a platform fee is untested and could impact demand if not managed carefully.
- Weather conditions like heatwaves and rains have affected delivery costs and margins, indicating vulnerability to external factors.
Q & A Highlights
Q: What are your thoughts on the near-term food delivery business in terms of growth? Any concerns on the horizon for you?
A: Akshant Goyal, CFO: We expect GOV growth of 20%-plus to continue in the near term. Currently, we're trending at 27%-28% year-on-year growth. There are no specific concerns on the demand side at this point.
Q: On the margins bit in the food delivery business, do you think you can achieve 4%-5% margins by the end of FY25?
A: Akshant Goyal, CFO: It's hard to comment on an exact timeline. We aim to grow the right way and invest in necessary areas while scaling. Margin expansion is ongoing, and we hope to reach that range in a few quarters.
Q: Regarding the 2,000 dark stores by March '26, what could this imply from a profitability standpoint?
A: Akshant Goyal, CFO: We believe the business will remain profitable despite the expansion. Long-term, we are confident this business can be as profitable as food delivery, if not more.
Q: Is the reduction in Google Maps APIs a material contributor to your bottom line?
A: Akshant Goyal, CFO: No, it is not going to impact our profitability meaningfully.
Q: On the delivery-related charges, is the increase QoQ across both food delivery and quick commerce?
A: Kunal Swarup, IR: Yes, there is some increase. However, net of customer delivery charges, there is no meaningful change to the delivery cost number.
Q: In the quick commerce business, is the fixed cost largely flattish QoQ?
A: Kunal Swarup, IR: Yes, total fixed costs balance each other out. Corporate costs have grown, but you don't see it at a total level due to variations in marketing spend.
Q: How do you intend to differentiate versus competitors and get users to switch to your platform in new areas?
A: Albinder Dhindsa, CEO Blinkit: We focus on maintaining high service quality and selection. In new locations, we find success in getting customers to adopt our service over time.
Q: What should lead to an improvement in take rate over the next three to four years?
A: Albinder Dhindsa, CEO Blinkit: Both product mix and ad income will contribute. Delivery fee is also part of the take rate computation.
Q: How broad-based was the growth across top eight and non-top eight cities in food delivery?
A: Albinder Dhindsa, CEO Blinkit: Growth is fairly broad-based. In top eight cities, supply sufficiency and onboarding new restaurants have been key drivers.
Q: How are you solving for selection in quick commerce while maintaining delivery speed?
A: Akshant Goyal, CFO: We focus on delivering a larger assortment within 10 minutes. We continuously innovate to achieve this without compromising on speed or cost.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
