The rapid expansion of Zomato’s quick commerce business, Blinkit, is likely to put pressure on the operating profit margins of this segment in the near term.
At the end of the September quarter, Blinkit had 791 stores to enable quick delivery of goods as compared to 411 in a similar period a year ago.
Zomato CFO Akshant Goyal said in the company’s presentation, “While most of our stores today are profitable with expanding margins, we are not seeing margin expansion at the aggregate level at this moment because of the investments we are making towards scaling our infrastructure.”
He said the expansion includes not just the stores but also the back-end large warehouses. “Since new stores and warehouses take a few months to ramp up, they end up being margin dilutive in the short term,” he remarked.
Source: Zomato filings
According to Zomato, the adjusted EBITDA (earnings before interest tax, depreciation and amortisation) loss at the end of the second quarter of FY25 was Rs 8 crore as compared to Rs 3 crore in the first quarter. However, there has been a significant decline in the EBITDA when compared to the second quarter of FY24 where the figure stood at Rs 125 crore.
At the same time, the other metrics of Blinkit continue to show a rapid rise. The number of orders at the end of the second quarter stood at 92.9 million as compared to 45.5 million in a similar period a year ago registering a 104% increase.
The gross order value per store for Blinkit came at Rs 9,81,000 at the end of first quarter as compared to Rs 7,57,000 in the similar period a year ago. However, the average value per order rose by 8% on a year-on-year basis to touch Rs 660 crore at the end of the second quarter.
The quick commerce segment is witnessing intense competition among players such as Blinkit, Zepto and Swiggy’s Instamart. Given the need for large amounts of capital for this business, each player is looking at fresh fundraise. However, it also raises questions about the economics of running such operations.
The Zomato CFO reiterated that the quick commerce business continues to operate at near Adjusted EBITDA break-even.
