Investors skeptical about Zomato’s entry into quick commerce after Blinkit acquisition: Jefferies

“We recently hosted the Zomato founder and CEO Deepinder Goyal and CFO Akshant Goyal for investor meetings in the US recently…Investors are generally convinced on the food delivery moat and the discussion was mainly around the unit economics. However, skepticism is high on quick commerce, given no proof of concept yet in any large market in the world. Mananagment, however, is bullish on the quick commerce business and sees Blinkit as a large driver of growth and profitability going forward,” the brokerage firm said.

A lot of investors expressed a fundamental question on Blinkit’s existence, with comments like “why someone want grocery delivery in 10-min?”, the note said. In the event of success, there is concern on competition from Amazon, Flipkart and Reliance Retail, Jefferies said.

But Zomato’s management told investors that several dark stores are at contribution break-even and more are expected to do so over the next year.

In July, the overall contribution loss was 10% of gross order value with adjusted Ebitda loss at Rs 900 crore, which is 19% of the gross order value. The margins would improve as the company adds more categories like beauty, personal care and pharmaceuticals.

Jefferies said that the management believes that the quick commerce business’ long-term margin may converge with food tech. For the next financial year, total investment (including loss) should be at $320 million, which incudes the $150 million pre acquisition loan.

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ET reported on July 18 about how
Blinkit is looking to improve margins by integrating its operations with Zomato’s restaurant supplies business Hyperpure. Blinkit will make use of Hyperpure’s supply chain to procure inventory, thereby saving costs through economies of scale.

ETtech

The company recently said that has also started delivering the iPhones from its dark stores in addition to the recent announcement of providing print out service to the customers. The company reported narrowing of
consolidated net loss at Rs 186 crore for the June quarter compared with Rs 359.70 crore in March quarter and Rs 360.70 crore in the year-ago quarter.

Ebitda loss reduced to Rs 150 crore, the company said in a BSE filing.