Two Very Different Announcements, One Quarter
This is Zomato's fifth quarter as a public company and its first as Q1 of a new fiscal year (Q1 FY23, quarter ended June 30, 2022), reviewed (not audited - the standard quarterly treatment) by Deloitte Haskins & Sells, results approved August 1, 2022.
Read only the numbers and this is the best quarter Zomato has reported since listing. Consolidated net loss narrowed to Rs. 186.0 crore, down 48.3% from Rs. 359.7 crore in Q4 FY22 and down 48.5% from Rs. 360.7 crore in the year-ago quarter - a genuine improvement on both comparisons, not a base-effect artifact the way last quarter's headline swing was. Loss before tax fell the same 48.3% QoQ. Revenue from operations grew 16.7% QoQ and 67.4% YoY to Rs. 1,413.9 crore ($179.1M), and - the number that matters most - the India food ordering and delivery segment's own operating result came in at essentially breakeven (Rs. 0.1 crore, versus a Rs. 76.6 crore loss last quarter and a Rs. 33.1 crore loss a year ago), with Contribution» margin rising again to 2.8% of GOV» from 1.7% in Q4 FY22 - the second straight quarter of improvement after three quarters of compression.
Read the filing's own notes, though, and a second, much bigger story sits alongside it. On June 24, 2022 - a week before this quarter even closed - Zomato's board approved acquiring up to 33,018 equity shares of Blink Commerce Private Limited (BCPL, formerly Grofers India, the entity behind Blinkit) for a total consideration of Rs. 4,447.5 crore, to be paid entirely in freshly issued Zomato stock: up to 628,530,012 new shares at Rs. 70.76 each. Shareholders approved it on July 25, 2022 (97%+ in favor), with only stock-exchange approval still pending as of the results call. Against the roughly 7,652 million shares already outstanding, that issuance is a ~7.6% dilution of every existing shareholder - the actual price of finally consummating an acquisition the last two posts flagged as still carrying an unmarked equity stake and open-ended loan exposure. The operating business got measurably healthier this quarter - and management used that same quarter to commit a chunk of the company to a well-known cash-burning asset. Both things are true, and neither excuses the other from real scrutiny.
The Prescription
Keep pushing exactly what's working in food delivery: Contribution margin has now improved for two straight quarters, GOV grew 10% QoQ to Rs. 6,430 crore, and the segment itself is at breakeven - the "focus and mindset" shift management describes (tightening cost and revenue levers simultaneously rather than trading one for the other) is showing up in the actual numbers, not just the shareholder letter's framing. Don't let Blinkit integration distract operational attention from a food-delivery business that has finally found its unit economics after five quarters of public scrutiny.
Stop treating "no cash left the building" as a governance answer for the Blinkit deal. Management's defense of the transaction - independent valuation from EY, a fairness opinion from Morgan Stanley, a no-related-party-transaction opinion from Saraf & Partners - addresses the letter of good governance, not the substance of the tension a reader should still hold: the founder personally held a stake in the same company he's now buying (exited in January 2022, before this deal was public), and the Chief People Officer of Zomato is married to Blinkit's founder. All-stock financing avoids a cash outflow, but it doesn't avoid dilution - existing shareholders are paying for this deal in the currency of their own ownership, whether or not a rupee of cash changes hands. The next quarterly filing, once Blinkit's numbers actually consolidate, is where this bet gets tested against reality instead of against an independent opinion letter.
Key Financial Metrics
Q1 FY23 (quarter ended June 30, 2022) vs. Q4 FY22 (quarter ended March 31, 2022) and Q1 FY22 (quarter ended June 30, 2021) - consolidated, reported in INR crore and USD (converted at the quarter-end rate of Rs. 78.96/$1)
| Metric | Q1 FY23 | Q4 FY22 | QoQ | Q1 FY22 | YoY |
|---|---|---|---|---|---|
| Revenue from Operations | Rs. 1,413.9 crore ($179.1M) | Rs. 1,211.8 crore ($153.5M) | ✅ +16.7% | Rs. 844.4 crore ($106.9M) | ✅ +67.4% |
| Adjusted Revenue | Rs. 1,810 crore ($229.2M) | Rs. 1,540 crore ($195.0M) | ✅ +18% | not disclosed on this basis | n/a |
| Adjusted EBITDA | Rs. (150.3) crore $(19.0)M | Rs. (224.5) crore $(28.4)M | ✅ loss narrowed 33.1% | Rs. (165.4) crore $(20.9)M | ✅ loss narrowed 9.1% |
| Operating Income (Loss before tax) | Rs. (186.0) crore $(23.6)M | Rs. (359.4) crore $(45.5)M | ✅ loss narrowed 48.3% | Rs. (359.0) crore $(45.5)M | ✅ loss narrowed 48.2% |
| Net Income (Loss for the period) | Rs. (186.0) crore $(23.6)M | Rs. (359.7) crore $(45.6)M | ✅ loss narrowed 48.3% | Rs. (360.7) crore $(45.7)M | ✅ loss narrowed 48.5% |
Of the quarter's Rs. (186.0) crore consolidated loss, Rs. (185.7) crore is attributable to Zomato's own shareholders. This is the first quarter since listing where the headline loss narrowed on both a QoQ and YoY basis without an exceptional item distorting either comparison - this quarter carried no exceptional item at all (versus Q4 FY22's small Rs. (7.9) crore exceptional loss and Q1 FY22's Rs. (15.9) crore exceptional loss), so the improvement is a clean read of the underlying business. Neither a cash-flow statement nor a balance sheet is required or disclosed in this interim filing - Ind AS only mandates those annually - so free cash flow and total cash aren't independently verifiable from the filed statements this quarter; management's shareholder letter states a cash balance of Rs. 11,400 crore ($1.44B) as of June 30, 2022 (a broader figure than the audited balance-sheet cash-and-equivalents line reported at fiscal year-end, since it includes liquid investments some data aggregators exclude), up from the Rs. 9,225 crore in unrestricted cash disclosed for FY22 year-end - but this quarter's letter, unlike Q4 FY22's, states no free-cash-flow figure at all. Standalone (parent-only, excluding subsidiaries) revenue was Rs. 1,131.5 crore with a Rs. 138.1 crore loss for the period - meaningfully smaller and less lossy than the consolidated figures above, underscoring how much of Zomato's loss now sits inside its subsidiaries (principally Hyperpure) rather than the core marketplace entity.
Key Operational Metrics
- India food delivery GOV: Rs. 6,430 crore ($814.3M), ✅ +10% QoQ
- Contribution (% of GOV): ✅ 2.8%, up from 1.7% the prior quarter - the second straight quarterly improvement
- Food delivery Adjusted EBITDA: ✅ reached breakeven this quarter per management, consistent with the segment result above
- Average monthly transacting customers: up 36% YoY (Q1 FY23 vs Q1 FY22); average monthly order frequency up 10% over the same period
- Hyperpure revenue: Rs. 272.7 crore ($34.5M), ✅ +40.4% QoQ, +262.6% YoY; Adjusted EBITDA loss margin improved to -13% from -20% in Q4 FY22
- IPO proceeds deployed: ✅ 66.3% (Rs. 5,781.8 crore of Rs. 8,728.0 crore net proceeds) as of June 30, 2022, up from 52.6% at fiscal year-end - continuing the steady deployment pace flagged last quarter
- Blinkit acquisition: board-approved June 24, 2022 for Rs. 4,447.5 crore in newly issued Zomato stock (628,530,012 shares at Rs. 70.76/share), shareholder-approved July 25, 2022 (97%+ in favor), stock-exchange approval still pending as of the results call - see Beyond the Usual
- Blinkit standalone performance (management-disclosed, unaudited MIS data, not part of Zomato's consolidated financials pre-close): monthly losses fell from Rs. 204.0 crore in January 2022 to an estimated Rs. 92.9 crore in July 2022; GOV already ~20% of Zomato's own food-delivery GOV within roughly six months of the deal being announced, concentrated in fewer than 15 cities - in Gurugram specifically, Blinkit's GOV was ~70% of Zomato's food-delivery GOV for June 2022
- Delivery-partner supply: the gig-worker shortage flagged last quarter has fully normalized, per management, after lasting about 45 days
Segment Results
Zomato reports three business-line segments - India food ordering and delivery, Hyperpure (B2B restaurant supply), and All other segments (residual, mainly dining-out/Zomato Pro and Talabat pass-through revenue in the UAE). Segment result is operating profit/loss before unallocated corporate costs, other income, share-based payment expense, finance costs, and exceptional items.
| Segment | Revenue (external) | QoQ | YoY | Segment Result | Q4 FY22 Result | Q1 FY22 Result |
|---|---|---|---|---|---|---|
| India food ordering and delivery | Rs. 1,074.4 crore ($136.1M) | ✅ +12.3% | ✅ +49.8% | ✅ Rs. 0.1 crore (breakeven) | Rs. (76.6) crore | Rs. (33.1) crore |
| Hyperpure | Rs. 272.7 crore ($34.5M) | ✅ +40.4% | ✅ +262.6% | Rs. (35.4) crore | Rs. (38.4) crore | Rs. (19.7) crore |
| All other segments (residual) | Rs. 66.8 crore ($8.5M) | ✅ +9.2% | ✅ +29.0% | ✅ Rs. 13.8 crore | Rs. 14.6 crore | Rs. 0.1 crore |
| Total | Rs. 1,413.9 crore ($179.1M) | ✅ +16.7% | ✅ +67.4% | Rs. (21.5) crore | Rs. (100.4) crore | Rs. (52.7) crore |
India food ordering and delivery carried nearly the entire improvement this quarter - a segment that lost Rs. 76.6 crore just three months ago essentially broke even, and did so with revenue still growing double digits both QoQ and YoY. This is the clearest evidence yet that Q4 FY22's Contribution-margin reversal was the start of a real trend, not a one-quarter blip - it's now two consecutive quarters of margin improvement across a growing revenue base, the combination that actually matters for a marketplace business.
Hyperpure narrowed its segment loss slightly in absolute terms (Rs. 35.4 crore versus Rs. 38.4 crore in Q4) while growing revenue 40% QoQ - meaning its loss-to-revenue ratio improved sharply, consistent with the Adjusted EBITDA margin gain from -20% to -13% management cites. It's still the segment furthest from profitability in absolute terms, but the trajectory is the best of the three.
All other segments (residual) stayed solidly profitable (Rs. 13.8 crore) for a second straight quarter, though its result ticked down slightly from Q4's Rs. 14.6 crore even as revenue grew - a shrinking margin on a growing revenue base is the one soft spot in an otherwise clean segment picture, though the absolute numbers here are small enough that this isn't yet worth over-reading.
Beyond the Usual
The board approved a Rs. 4,447.5 crore all-stock Blinkit acquisition using a valuation and governance process it disclosed only in outline
The board approved acquiring up to 33,018 equity shares of Blink Commerce Private Limited (Blinkit, formerly Grofers India) for total consideration of Rs. 4,447.5 crore - paid entirely through the issuance of up to 628,530,012 new Zomato shares at Rs. 70.76 per share, a ~7.6% dilution of the company's pre-deal share count. Shareholders approved the deal on July 25, 2022 with 97%+ of votes in favor; only stock-exchange approval remained outstanding as of the results call. Management's shareholder letter addresses two specific governance questions directly - that the valuation used an independent assessment from EY plus a fairness opinion from Morgan Stanley, and that outside counsel (Saraf & Partners) concluded the deal isn't a related-party transaction under Indian law, despite the CEO's past personal stake in Blinkit (exited in January 2022, already disclosed last quarter) and despite Zomato's Chief People Officer being married to Blinkit's founder. None of the underlying valuation work itself - the EY report, the Morgan Stanley opinion, or the Saraf & Partners memo - is disclosed in the filing; a reader gets management's summary of the conclusions, not the analysis behind them. The deal is being paid entirely in stock rather than the loan capital the two prior quarters tracked flowing into Blinkit - this filing doesn't mention that standing loan facility or its draw-down status at all.
The footnote that used to show whether Blinkit's equity stake had ever been marked to market has disappeared
The Q3 FY22 and Q4 FY22 posts both tracked a footnote itemizing fair-value movements on each of Zomato's minority equity stakes individually - showing three of four stakes (Shiprocket, magicpin, Curefit) getting genuine fair-value updates while the Grofers/Blinkit stake alone stayed frozen at acquisition cost. This quarter's filing has no equivalent itemized table. The only visible fair-value movement is a single aggregate figure buried in other comprehensive income: a Rs. (80.6) crore loss on "changes in fair value of equity and preference instruments carried at FVTOCI»" for the whole basket combined - the largest such swing disclosed in any quarter to date, versus a Rs. 9.6 crore gain in Q4 FY22 and nil a year earlier. Whether that loss is Blinkit finally getting marked down ahead of the acquisition, one of the other three stakes moving, or some combination, isn't answerable from what this filing discloses - the itemized breakdown that would have settled the question is simply gone this quarter, right as the question became most relevant.
Zomato quietly bought a warehousing business from the same group it's about to acquire
During the quarter, Zomato Hyperpure Private Limited signed a Business Transfer Agreement with Hands on Trades Private Limited ("HOTPL", a fellow subsidiary of the Blinkit parent entity) to purchase HOTPL's warehousing and ancillary-services business for up to Rs. 60.7 crore, subject to closing conditions. This is a separate transaction from the headline Blinkit share acquisition, executed with a Blinkit-group affiliate ahead of that larger deal actually closing - effectively Zomato buying supply-chain infrastructure from its soon-to-be subsidiary's sister company before the acquisition itself is finalized.
The subsidiaries Zomato has promised to bail out are getting more expensive to watch, not less
Last quarter's post found Zomato Hyperpure Private Limited (ZHPL) and Zomato Entertainment Private Limited (ZEPL) carrying accumulated losses of Rs. 280.6 crore and Rs. 19.5 crore respectively, backstopped by the parent's standing commitment to cover either entity's liabilities if it can't meet them itself. This quarter's equivalent footnote shows ZHPL's accumulated losses have grown to Rs. 327.2 crore (+Rs. 46.6 crore in one quarter) and ZEPL's to Rs. 20.7 crore (+Rs. 1.2 crore) - both entities still losing money at a real pace even as the consolidated numbers improve overall. The company re-ran the same discounted-cash-flow impairment test it ran last quarter and again concluded no impairment is required, reviewed by the Audit Committee and Board.
The CEO's personal stock-option grant no longer gets its own disclosure line
Three straight prior posts tracked the amortizing cost of the Rs. 1,363.5 crore ESOP grant made solely to CEO Deepinder Goyal shortly before the IPO, reaching 86% of the company's entire FY22 stock-based compensation by year-end. This filing discloses only the aggregate share-based payment expense for the whole company - Rs. 157.3 crore this quarter, down 30.1% from Rs. 225.0 crore in Q4 FY22 and down 25.5% from Rs. 211.1 crore a year earlier - with no individual-grant breakdown at all. The prior grant may simply be nearing full amortization (it was a three-year vesting schedule struck around the IPO), which would explain a falling aggregate figure without a new disclosure line, but this filing gives no way to confirm that read directly.
Target Valuation Range
The market now prices Zomato at Rs. 41,214 crore, roughly 5.7x-7.3x revenue (Adjusted Revenue basis to statutory revenue basis) - the stock has now fallen for three straight quarters even as the underlying operating numbers improved for two of them - a widening gap between what the business is actually doing and what the market is paying for it, at least on the metrics available; the pending Blinkit dilution is a real, quantifiable offset to that gap that a reader shouldn't ignore.
Zomato's shares closed at Rs. 53.85 on June 30, 2022, down 34.6% from the Rs. 82.30 close at the end of Q4 FY22 and down 64.7% from the stock's November 2021 high of Rs. 152.55 - a third consecutive quarterly decline, continuing the slide flagged last quarter.
| Market cap buildup | Q4 FY22 | Q1 FY23 |
|---|---|---|
| Share price (period-end) | Rs. 82.30 | Rs. 53.85 |
| Shares outstanding (paid-up capital implied) | 7,642,940,000 | ~7,652 million (pre-Blinkit issuance) |
| Market capitalization | Rs. 62,901 crore | Rs. 41,214 crore ($5.22B) |
Market cap tracked the share-price decline almost exactly since no material new shares were issued during the quarter itself.
A real DCF or reverse-DCF still isn't credible this quarter: no cash-flow statement or balance sheet is disclosed in an interim Ind AS filing, and management's letter doesn't even provide the non-GAAP free-cash-flow figure it gave last quarter (see Key Financial Metrics) - there's less balance-sheet visibility this quarter than last, not more. A peer-multiples sanity check remains the only viable approach, and there still isn't a comparably-sized listed pure-play Indian food-delivery peer.
| Peer-multiple sanity check | Q4 FY22 | Q1 FY23 |
|---|---|---|
| Revenue (annualized) | Rs. 4,847.2 crore | Rs. 5,655.6 crore |
| Adjusted Revenue (annualized) | Rs. 6,160 crore | Rs. 7,240 crore |
| P/S (annualized revenue) | 13.0x | 7.3x |
| P/S (Adjusted Revenue basis) | 10.2x | 5.7x |
The multiple has now roughly halved twice in a row while the underlying business has gotten measurably better each time - a compression this large, against genuinely improving fundamentals, is closer to a re-rating opportunity than a verdict on the business itself, though the pending 7.6% Blinkit dilution (see Beyond the Usual) is a real cost a buyer today would be paying that the pre-dilution share count above doesn't yet reflect.
Zomato Limited's Statement of Consolidated and Standalone Unaudited Financial Results for the quarter ended June 30, 2022 (reviewed by Deloitte Haskins & Sells, dated August 1, 2022), the company's regulatory XBRL filing for the same period, and the company's Q1 FY23 shareholder letter and results presentation of the same date.