Why Zomato stock crashed 7% today post-Q3 results
Zomato’s Q3 net profit fell 57% as its margins continued to face pressure from increased spending on opening more centers to fulfill orders at Blinkit.
By: Vicky singla on 21 January
Zomato shares declined over 10.5 % on January 21 after the food delivery platform announced its December quarter results.
Three reasons why the Street was not enthused about the results
- Aggressive store addition: Zomato reported a 57 % fall in third-quarter profit on Monday as its perimeters continued to face pressure from increased spending on opening further centers to fulfill orders at its Blinkit quick commerce platform.” On a QoQ base, consolidated Acclimated EBITDA declined by 14 % ( or Rs 45 crore) despite the enhancement in food delivery perimeters, largely due to accelerated investments in expanding our quick commerce store network, where daily losses increased by Rs 95 crore QoQ,” said the establishment in a stock exchange form.
Zomato aims to get to 2,000 Blinkit stores by December 2025, said CEO Deepinder Goyal.” The losses in our quick commerce business this quarter are largely on account of pulling forward the growth investments in the business that we’d have else made in a staggered manner over the coming many diggings. As of now, it seems like we will get to our target of 2,000 stores by Dec 2025, much earlier than our former guidance of December 2026,” said Goyal.
At the time of market closing, Zomato’s shares on BSE closed 7.27% lower at Rs 221 apiece on 20 jan.
2. ‘Growth retardation‘: The Gross Order Value ( GOV) growth in the food delivery business was only 2 advanced on a successional basis.” Our 20 YoY GOV growth guidance for the food delivery business is longer-term. There will be ages of advanced and lower growth along the way. Presently, we’re going through a broad-grounded retardation in demand which started during the alternate half of November. Notwithstan- ding the current retardation, we’re positive about a recovery soon and remain confident of the long-term outlook of 20 monthly GOV growth in the business given the strong fundamentals,” said Rakesh Ranjan, CEO- Food Delivery Business at Zomato.
Regarding the District app, Zomato said ” While the core business continues to be profitable, the daily loss in Q3FY25 was largely driven by the investment in the new District app ( platoon, marketing, tech costs). Most of the investments from then on will concentrate on getting guests to transition to the new app and grow their selection on our platform. We’re likely to operate in losses for the coming time, but we don’t anticipate them to be meaningful in the overall environment of Zomato.”
3. Rise in hand costs: Zomato expects hand costs to ” remain elevated in the near term.” ” The increase in ESOP charge ( 21 QoQ) and cash hand benefits expenditure( 15 QoQ) was driven by two effects – ( a) increase in headcount in line with growth across businesses, especially quick commerce and going– -out ( first full quarter post-acquisition), and( b) advanced cost of retaining and acquiring gift in our quick commerce business presently driven by the heightened competitive intensity. We anticipate this war for gifts to continue for the coming many diggings. Hence the total hand cost( ESOP cash) is likely to remain elevated in the near term. We had mentioned in our Q1FY25 letter that total hand cost will likely come down to 6- 8 of Acclimated profit by FY26,” said Akshant Goyal, Chief Financial Officer, Zomato.
Zomato Q3
Zomato reported a 57 % fall in third-quarter profit as its perimeters continued to face pressure from increased spending on opening further centers to fulfill orders at its Blinkit quick commerce platform.
Its consolidated Net profit Fell to Rs 59 crore in the quarter ended Dec. 31, from Rs 138 crore a time ago.
Profit in the food delivery business increased nearly 22 in the quarter, while profit from Blinkit, its quick commerce arm, surged further than two-fold.
Zomato share price plunged on Tuesday, January 21, 2025, after the company reported a significant decline in its net profit for the third quarter of the financial year 2024-25. The company’s net profit fell by 57.24% to ₹59 crore, compared to ₹79 crore during the same quarter of the previous year. This disappointing performance led to a sharp drop in the company’s stock price, causing significant losses for investors.
Zomato weak results were attributed to several factors, including increased competition in the food delivery market, rising input costs, and a slowdown in consumer spending. The company’s investment in its quick-commerce business, Blinkit, also put a strain on its profit margins.
Zomato share price has been volatile in recent months, and the company’s weak results have further exacerbated investor concerns. Analysts are now predicting a further decline in the company’s stock price, as they expect its profitability to remain under pressure in the coming quarters.