Zomato Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Zomato Ltd (ZOMATO) Q4 FY24 Earnings Concall

• Quick Commerce Expansion
  • Blinkit plans to double its store count in the next 12 months.
  • Expansion will be focused on top metro cities like Bangalore, Hyderabad, and Mumbai.
  • Target is to increase penetration in under-served areas within these cities.
  • Delhi NCR will remain the largest market, but other metros are expected to catch up.
• Breakeven Timeline
  • New stores are expected to take slightly longer than 2 months to reach contribution breakeven.
  • Exact timeline to depend on whether the store is in an existing or new location.
  • Blinkit has accounted for the longer breakeven period in their projections.
• GOV Growth
  • Blinkit believes their GOV could potentially grow 4 times in the long term.
  • 4x growth an aspirational goal, not a specific timeline commitment.
  • It will be a function of the store expansion and market penetration over time.
• Monthly Transacting Users Trends
  • Quick commerce MTUs have seen acceleration, while food delivery MTUs have been volatile.
  • Blinkit expects quick commerce MTUs to continue growing, aligned with GOV growth of 20%+.
  • MTU growth is expected to be driven by a combination of AOV increase and new user acquisition.
• Hyperpure Profitability and Growth
  • Hyperpure’s EBITDA margins improved from -9% in Q4 last year to -2% in Q4 this year.
  • Growth rates have moderated from 146% YoY to 99% YoY in Q4, but still remain healthy.
  • Focus is on driving growth rather than immediate profitability, as the business is still subscale.
• Blinkit Store Throughput
  • Directionally, average throughput per store is expected to increase over time.
  • However, expansion can be lumpy, leading to potential one-off quarters of lower throughput.
  • Overall, throughput per store is not expected to decline significantly.
• Zomato Everyday Expansion
  • Scaling the Everyday (daily essentials) use case for over 1.5 years.
  • Currently live in Gurgaon, with plans to expand to Mumbai and Bangalore in the next few months.
  • Expansion to other cities will be gradual, based on customer experience and economics.
• Blinkit Expansion Strategy
  • Expansion driven by confidence in business fundamentals and capabilities, not competition or margins.
  • Focused on intensifying density in top 8 urban locations and plugging coverage gaps.
  • 75% of new stores opened in top 8 cities, 25% in non-top 8 cities.
  • Growth in top 8 cities balanced by continued expansion in smaller cities.
  • AOVs are higher in top 8 cities compared to smaller cities.
  • Q4 witnessed a dip in AOV, but lower than the dip in the previous year’s Q4.
  • Zomato expects Blinkit MTUs to eventually cross Zomato’s food delivery MTUs.
  • Expanding the footprint of existing dark store partners in cities.
  • Methodology for partner selection and engagement to remain largely the same.
• ESOP Costs
  • Total employee cost as a percentage of revenue reduced from 29% in FY22 to 12% in FY24, showing operating leverage.
  • The recent 2% ESOP pool expansion is expected to suffice for the next 5 plus years.
  • ESOP cost of ₹160 crore in Q4 is expected to increase further going forward.
• Blinkit Income and Margin
  • Zomato expects advertisement revenue on Blinkit to increase from current levels.
  • Advertisement income has been a major driver of Blinkit’s unit economics so far.
  • Zomato has indicated a steady state adjusted EBITDA margin of 4-5% for Blinkit.
  • The fixed cost as a percentage of GOV is expected to be broadly similar to food delivery business.
• Increasing Take Rates
  • Zomato does not have specific targets for increasing take rates through ad sales or customer initiatives.
  • The approach is to optimize overall profits while providing the best customer experience.
  • The company aims to juggle multiple levers to drive growth and achieve desired margin levels.