Release Date: October 22, 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 a significant year-on-year growth of over 120% to 130% in its quick commerce business, indicating robust expansion.
- The company is successfully expanding its presence beyond Delhi NCR, with the share of business from this region falling below 40%, showing growth in other major metros.
- Average Order Values (AOVs) in the top seven cities are similar, with some non-Delhi markets even surpassing Delhi, indicating strong performance across regions.
- Zomato Ltd (BOM:543320) has launched Blinkit in over 40 markets, demonstrating its aggressive expansion strategy in quick commerce.
- The company is focused on maintaining good service levels and sustainable profitability, even amidst heightened competition and market expansion.
Negative Points
- Zomato Ltd (BOM:543320) faces increasing competition in the quick commerce space, with new entrants like Flipkart and existing peers raising capital.
- The company's take rates have been somewhat flattish, attributed to the higher velocity of new store openings and the mix of new stores.
- There is a noticeable increase in fixed costs, particularly in the quick commerce segment, due to store and warehouse expansions.
- Despite the growth, Zomato Ltd (BOM:543320) has not seen any contribution margin expansion in recent quarters, largely due to ongoing expansion efforts.
- The company has not yet decided on implementing a loyalty program for its quick commerce business, which could be a disadvantage compared to competitors who have such programs.
Q & A Highlights
Q: How is Zomato addressing the increasing competition in the quick commerce sector, and what are the key focus areas for the next few quarters?
A: Akshant Goyal, CFO, mentioned that Zomato is concentrating on its own business growth, which is expanding at over 120-130% year-on-year. The company is focused on maintaining service levels and expanding categories, rather than aggressively pursuing market share amidst rising competition.
Q: Can you provide insights into Zomato's expansion strategy beyond Delhi NCR and the impact on average order values (AOVs)?
A: Akshant Goyal, CFO, stated that the share of Delhi NCR in their business has decreased to less than 40%, indicating growth in other cities. The AOVs in the top seven cities are fairly similar, with some cities outside Delhi even having higher AOVs.
Q: What is the rationale behind the recent capital expenditure increase, and how does it relate to store expansion?
A: Akshant Goyal, CFO, explained that the increase in CapEx, which amounted to INR214 crores, was primarily due to the opening of 152 new stores and seven new warehouses. This expansion is part of their strategy to build infrastructure in top cities before venturing deeper into smaller markets.
Q: How does Zomato plan to utilize the potential $1 billion capital raise, and what are the strategic implications?
A: Akshant Goyal, CFO, clarified that the board has passed an enabling resolution to raise up to $1 billion, subject to shareholder approval. The actual size will depend on market conditions. The capital is intended to strengthen the balance sheet rather than increase discounting.
Q: How is Zomato's quick commerce business performing in terms of audience overlap with food delivery, and what impact do new categories have?
A: Akshant Goyal, CFO, noted that the audience overlap between quick commerce and food delivery is decreasing, as quick commerce appeals to a broader demographic. New categories are bringing in new customers, and the GMV mix is skewed towards top SKUs, similar to city distribution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
