ETERNAL The First Profitable Quarter Ever - So Why Was the Underlying Business Still Losing Money?

A Profit Built on a Tax Credit, Not (Quite) an Operating Turnaround

This is Zomato's ninth quarter as a public company - Q1 FY24 (quarter ended June 30, 2023), the first quarter of a new fiscal year and, per the shareholder letter's own framing, a genuine milestone: the consolidated business, including quick commerce, was Adjusted EBITDA and profit-after-tax positive for the first time ever, a full quarter ahead of the "next four quarters" guidance management gave last quarter. Adjusted EBITDA came in at +Rs. 12 crore (from -Rs. 150 crore in Q1 FY23), and net profit was +Rs. 2 crore - the first positive quarter in the company's history as a listed entity. Results were reviewed, not audited (as is standard for an interim quarter), and approved by the board on August 3, 2023.

But look one line up the statement, and the milestone gets more complicated. Loss before tax was still Rs. (15) crore - a real, if narrow, pre-tax loss. What flips the headline number to positive is a Rs. 17 crore deferred tax credit, arithmetic that isn't disclosed anywhere in the shareholder letter's celebration of the milestone. Strip out the tax line and the underlying business, on a statutory basis, was still losing money this quarter - just barely, and by far the smallest margin in the company's history, but still a loss. None of this makes the operating progress underneath any less real: food delivery's GOV^» grew 11.4% QoQ (to Rs. 7,318 crore) after last quarter's outright decline, its Adjusted EBITDA^» margin kept climbing (1.2%→2.5% of GOV), and Blinkit's Contribution^» turned positive for the first time ever in the month of June alone. The operating story earns its own optimism. The "first profitable quarter" framing, read literally against the actual P&L, earns a little less than the milestone banner suggests - see Beyond the Usual.

CFO Akshant Goyal says the company now expects to "remain profitable going forward" and to keep delivering 40%+ YoY Adjusted Revenue growth for at least the next couple of years. CEO Deepinder Goyal, asked directly what changed since last quarter's more conservative guidance, credited faster-than-expected execution rather than any single new lever: "some critical parts of the team across our businesses out-executed our expectations/plans." Blinkit CEO Albinder Dhindsa was more concrete about what's next for quick commerce: the business should keep growing GOV 60%+ YoY while continuing to improve unit economics, and management now expects to reach Blinkit Adjusted EBITDA breakeven at a cumulative investment "much lower" than the $320 million ceiling disclosed back in August 2022.

The Prescription

Keep pressing exactly the two levers that produced this quarter's real progress: Zomato Gold's proven ability to lift food-delivery order frequency without adding fixed costs, and Hyperpure's minimum-order-value discipline, which traded a shrinking restaurant base for a healthier average order value and margin. Both are durable, repeatable mechanics rather than one-off wins, and food delivery's Adjusted EBITDA margin has now improved for five straight quarters on this exact playbook.

Stop scaling Blinkit's dark-store count before its unit economics are durably, not just momentarily, positive. Management is touting Contribution turning positive in the single month of June 2023 as a milestone (see Beyond the Usual) while simultaneously guiding to about 100 net new stores during FY24 - continued store growth risks re-widening exactly the metric that only just, and only briefly, crossed zero. A dark store take months to mature to full productivity; adding 100 of them while Contribution is still negative for the quarter as a whole (-0.6% of GOV) is stacking a fresh cohort of underperforming stores on top of a business that hasn't yet proven the quarterly number can stay positive, only that one particularly strong month can.

Key Financial Metrics

Q1 FY24 (quarter ended June 30, 2023) vs Q4 FY23 (quarter ended March 31, 2023) and Q1 FY23 (quarter ended June 30, 2022) - consolidated, reported in INR crore and USD (converted at the fiscal-quarter-end rate of Rs. 82.08/$1 for Q1 FY24, Rs. 82.10/$1 for Q4 FY23, and Rs. 79.09/$1 for Q1 FY23)

Metric	Q1 FY24	Q4 FY23	QoQ	Q1 FY23	YoY
Revenue from Operations	Rs. 2,416 crore ($294.4M)	Rs. 2,056 crore ($250.4M)	✅ +17.5%	Rs. 1,414 crore ($178.8M)	✅ +70.9%
Adjusted Revenue (management non-GAAP)	Rs. 2,786 crore ($339.4M)	Rs. 2,413 crore ($293.9M)	✅ +15.5%	Rs. 1,810 crore ($228.9M)	✅ +53.9%
Segment Result (aggregate, pre-corporate-cost)	Rs. 52 crore ($6.3M)	Rs. (142.0) crore $(17.3)M	✅ swung to profit	n/a (segment structure not comparable)	n/a
Operating Income (Loss before tax)	Rs. (15) crore $(1.8)M	Rs. (204) crore $(24.9)M	✅ loss narrowed 92.6%	Rs. (186) crore $(23.5)M	✅ loss narrowed 91.9%
Net Income (Profit/Loss for the period)	✅ +Rs. 2 crore ($0.2M)	Rs. (188) crore $(22.9)M	✅ first-ever profit	Rs. (186) crore $(23.5)M	✅ first-ever profit
Adjusted EBITDA (management non-GAAP)	✅ +Rs. 12 crore ($1.5M)	Rs. (175) crore $(21.3)M	✅ swung to profit	Rs. (150) crore $(19.0)M	✅ swung to profit

Revenue growth genuinely reaccelerated this quarter - +17.5% QoQ, more than three times last quarter's two-year-low pace of +5.5% - and every line below it improved in step: total expenses grew only 7.4% QoQ (Rs. 2,431 crore → Rs. 2,612 crore) while total income grew 16.6% (Rs. 2,227 crore → Rs. 2,597 crore), the operating-leverage gap that actually produced the quarter's profit. Net Income swinging from a loss to a Rs. 2 crore profit is the headline, but as flagged above, the pre-tax line (Loss before tax, Rs. (15) crore) is what actually reflects the underlying business, and it was still negative. Total comprehensive income (which folds in other comprehensive income - mark-to-market gains on equity investments, mainly) was a genuinely positive Rs. 43 crore, versus a Rs. (162) crore loss last quarter.

Key Operational Metrics

• India food delivery GOV: ✅ Rs. 7,318 crore, +11.4% QoQ - a sharp reversal of last quarter's outright 1.7% GOV decline, driven by continued demand recovery since February, a seasonally strong Q1, Zomato Gold now covering 30%+ of GOV, and management citing "great execution" through a quarter hit by extreme heat and unseasonal rain
• Food delivery Adjusted EBITDA margin (% of GOV): ✅ 2.5%, up from 1.2% last quarter - the fifth straight quarterly improvement, now just one step below management's disclosed 4-5% medium-term target
• Food delivery Contribution margin (% of GOV): ✅ 6.4%, up from 5.8% last quarter
• Zomato Gold membership: contributes 30%+ of food-delivery GOV, continuing to drive higher order frequency without a city-count-driven cost expansion
• Average monthly transacting customers (food delivery): ✅ 17.5 million, up from 16.6 million last quarter
• Hyperpure revenue: ✅ Rs. 617 crore, +29.1% QoQ, +126.1% YoY; Adjusted EBITDA margin improved to -6% of revenue from -9%, on continued minimum-order-value discipline and supply-chain efficiency gains
• Quick commerce (Blinkit) GOV: ⚠️ Rs. 2,140 crore, +4.6% QoQ - a sharp deceleration from ~17-20% QoQ growth the prior two quarters, caused by a self-inflicted operational disruption (see Beyond the Usual), not a demand problem - management says June and July both set all-time highs for GOV and transacting customers after the disruption resolved, and guides to 20%+ QoQ GOV growth next quarter
• Blinkit Contribution margin (% of GOV): ✅ improved to -0.6% from -2.7% last quarter - and turned outright positive in the single month of June 2023, a first
• Blinkit Adjusted EBITDA margin (% of GOV): ✅ improved to -6.2% from -9.9% last quarter
• Blinkit average order value: ✅ Rs. 582, up from Rs. 522 last quarter, even as order volumes fell to 36.8 million from 39.2 million last quarter - a genuine AOV-volume trade-off caused by the same operational disruption
• Zomato Dining-Out GOV (India): Rs. 515+ crore in the quarter, ~7% of food delivery's own GOV, already Adjusted-EBITDA-positive at roughly 1% of GOV - management says the business is "finally" shaping up and is planning to report it, combined with Zomato Live, as a new "Going-out" segment starting next quarter
• Consolidated cash balance (management's broader non-GAAP measure): Rs. 11,573 crore, up from Rs. 11,323 crore last quarter

Segment Results

Zomato reports four business-line segments this quarter - India food ordering and delivery, Hyperpure (B2B restaurant supply), Quick commerce (Blinkit), and All other segments (residual, mainly dining-out and Zomato Live revenue). Segment result is operating profit/loss before unallocated corporate costs, other income, share-based payment expense, finance costs, and exceptional items. Management has announced a fifth line - "Going-out" (dining-out plus Zomato Live) - will be broken out separately starting next quarter.

Segment	Revenue (Q1 FY24)	QoQ	Segment Result (Q1 FY24)	Q4 FY23 Result
India food ordering and delivery	Rs. 1,375 crore ($167.5M)	✅ +17.0%	✅ Rs. 186 crore (profit)	Rs. 81.5 crore
Hyperpure	Rs. 617 crore ($75.2M)	✅ +29.1%	⚠️ Rs. (29) crore	Rs. (39.8) crore
Quick commerce (Blinkit)	Rs. 385 crore ($46.9M)	✅ +5.5%	⚠️ Rs. (105) crore	Rs. (179.1) crore
All other segments (residual)	Rs. 49 crore ($6.0M)	✅ +1.4%	✅ Rs. 0 crore (breakeven)	Rs. (4.6) crore
Total (segment result, before finance costs/unallocated items)	Rs. 2,426 crore gross ($295.7M)		Rs. 52 crore	Rs. (142.0) crore

Every segment's own operating result improved QoQ, the cleanest across-the-board result the company has posted since Blinkit's consolidation began. India food ordering and delivery posted Rs. 186 crore of segment profit - more than double last quarter's Rs. 81.5 crore, itself a record at the time - on the GOV reacceleration and Adjusted EBITDA margin improvement detailed above. Hyperpure narrowed its loss to Rs. 29 crore from Rs. 39.8 crore even as revenue grew 29% QoQ, continuing the trend of an absolute loss shrinking while the top line compounds. Quick commerce narrowed its segment loss to Rs. 105 crore from Rs. 179.1 crore, a meaningfully faster pace of improvement than its GOV growth alone would suggest, reflecting the operating-leverage gains from stabilized dark-store throughput even through the April disruption. All other segments (residual) reached segment breakeven (Rs. 0 crore) for the first time, up from a Rs. 4.6 crore loss last quarter, as the shrinking Talabat/Zomato Pro drag from prior quarters finishes working its way out of the base.

Segment revenue in this table is on a gross, pre-inter-segment-elimination basis (Rs. 2,426 crore, versus Rs. 10 crore of inter-segment revenue eliminated to reach the Rs. 2,416 crore statutory Revenue from Operations figure used elsewhere in this post) - a presentation convention Zomato's own XBRL filing uses and this post preserves for consistency with the segment footnote.

Beyond the Usual

This quarter's regulatory XBRL filing is a bare interim statement - no footnotes beyond a single EPS note - which is standard for a non-year-end quarter (the same was true every interim quarter in this company's history; footnotes only arrive with the annual filing). Every finding below instead comes from the shareholder letter and presentation deck's own disclosures, not from mined financial-statement notes.

The first-ever profitable quarter rests on a tax credit, not on the pre-tax business turning the corner

The shareholder letter and its "Milestone Alert" banner celebrate the consolidated business turning "Adjusted EBITDA and PAT positive (first time ever!)," citing a Rs. 2 crore profit after tax. What the letter doesn't mention: Loss before tax was still Rs. (15) crore this quarter - a real, if the smallest-ever, pre-tax loss. The swing to a Rs. 2 crore net profit comes from a Rs. 17 crore deferred tax credit (against effectively nil current tax), not from the underlying operating business crossing into profitability on its own. Adjusted EBITDA turning positive (+Rs. 12 crore, a real and separately verifiable non-GAAP measure that doesn't depend on the tax line) is a genuine milestone in its own right - but "profit after tax," the number management chose to headline, is flattered by a tax-timing item a reader wouldn't know about without checking the line above it.

A genuine quarter-only cash flow statement finally exists - and it resolves last quarter's disputed "surplus cash" claim for real

Every prior post flagged the same limitation: Ind AS only requires a full cash-flow statement annually, so a genuine quarter-only GAAP cash-flow read never existed, and last quarter's management claim of "the first quarter of surplus cash" couldn't be checked against one - the derived statutory number instead showed a cash outflow of roughly Rs. 327 crore. This quarter's presentation deck voluntarily discloses a real cash-flow statement (Annexure F) covering the quarter alone: net cash generated from operating activities of Rs. 69 crore, against roughly Rs. 24-29 crore of capex, for a genuinely positive free cash flow of approximately Rs. 40-45 crore. Unlike last quarter's disputed claim, this one is a real, GAAP-basis surplus - though see the finding below on how much of it is a one-off. (The statement is oddly labeled "Year ended June 30, 2023" rather than "quarter ended" - almost certainly a template carryover, since the actual figures are clearly quarter-scale, not annual-scale, and the balance-sheet and P&L annexures in the same deck are correctly labeled by quarter.)

A meaningful share of this quarter's cash surplus is a one-time treasury reshuffling, not repeatable operating cash flow

Management's own Adjusted-EBITDA-to-cash bridge shows "treasury income received" jumping to Rs. 329 crore this quarter, from Rs. 230 crore in Q4 FY23 and Rs. 117 crore in Q3 FY23. The letter explains why: Zomato redeployed a large chunk of its fixed deposits into longer-duration government securities and AAA-rated corporate bonds, and the premature liquidation of those FDs triggered a lump-sum receipt of accrued interest from past quarters, landing all at once as cash this period. Management says plainly that "we expect the treasury income receipts to be much lower than the levels we saw in Q1FY24" going forward. This doesn't undermine the cash-flow statement's genuineness (see the finding above) - the cash is real, received, and disclosed - but it does mean a meaningful share of this quarter's "surplus cash" narrative is a one-time reshuffling of the investment book rather than a repeatable run rate, worth remembering before extrapolating this quarter's cash generation into future ones.

Blinkit's "first-ever positive Contribution" milestone is a one-month figure, not a quarterly one

The Milestone Alert banner states "Quick commerce (Blinkit) business turned Contribution positive for the first time ever, in the month of June 2023." That's accurate as stated - but the quarter-as-a-whole Contribution margin was still -0.6% of GOV (improved from -2.7% last quarter, but still negative). Management chose to headline the strongest single month inside the quarter rather than the quarter's own number, a framing choice that makes the milestone read more complete than the underlying data shows. The trend is real and improving fast - four straight quarters of Contribution-margin narrowing - but the business hasn't yet had one profitable quarter, only one profitable month inside a still-loss-making quarter.

Blinkit's slower GOV growth traces to a self-inflicted disruption over a delivery-partner payout change, not softening demand

Blinkit GOV grew only 4.6% QoQ this quarter, a sharp deceleration from roughly 17-20% QoQ growth the prior two quarters. Management attributes this almost entirely to an operational disruption in April 2023 caused by a change to the delivery-partner payout structure: some dark stores shut for several days in parts of the country, and gig-worker availability across the network ran 15-20% below normal for around 45 days, compounded by extreme heat and unseasonal rain. Operations reportedly normalized in early June, with management citing all-time-high GOV and transacting customers in June and (separately) July, and guiding to 20%+ QoQ GOV growth next quarter. Worth watching given how central Blinkit's growth trajectory is to the wider investment case - a payout-structure change causing a company-controlled, month-plus operational disruption is a different risk than a demand slowdown, but it's still a risk the company created for itself.

Zomato is quietly building out a fourth reportable segment around dining-out and live events

Management disclosed that Dining-Out (Rs. 515+ crore of GOV this quarter, roughly 7% of food delivery's own GOV, and already Adjusted-EBITDA-positive at about 1% of GOV) will be combined with the nascent Zomato Live events-and-ticketing business (which hosts the "Zomaland" food carnivals) into a new "Going-out" segment, to be broken out separately in the P&L starting next quarter. Management is also "contemplating" spinning Going-out out into its own app, consistent with the company's stated preference for building "super brands" rather than a single super app - and explicitly invited shareholder feedback on the idea via email. At scale, management believes Going-out could generate 5%+ Adjusted EBITDA margins as a percentage of GOV, ahead of food delivery's own current 2.5%.

The Blinkit audit-scope question and the subsidiary impairment test are both structurally silent this quarter - not resolved, just not due

Two straight quarters, and then the FY23 year-end filing itself, flagged that Blink Commerce Private Limited's own financial results sit outside Deloitte's direct audit/review scope, and that the standing parental-support DCF impairment test for ZHPL/ZEPL/BCPL relies on a valuation date that lags the balance-sheet date. Neither thread gets an update this quarter - not because either was resolved, but because an interim, reviewed-not-audited quarterly filing carries no auditor's report on subsidiaries and no impairment test at all; both are exclusively year-end disclosures under Ind AS. The questions remain genuinely open and will next be checkable at the FY24 year-end filing (Q4 FY24, expected mid-2024) - a structural gap in visibility, not a resolved one.

Target Valuation Range

The market now prices Zomato at Rs. 63,042 crore, roughly 5.7x-7.8x revenue (Adjusted Revenue basis to trailing-twelve-month statutory revenue basis) - a rerating that's largely caught up with the real operating improvement, not run ahead of it - but with the stock up 47% in a single quarter on a still-single-quarter profit, there's less margin of safety in this price than there was three months ago.

Zomato's shares closed at Rs. 75.05 on June 30, 2023, up 47.2% from the Rs. 51.00 close at the end of Q4 FY23 - the sharpest single-quarter move in the company's history as a public company, reversing two straight quarterly declines, though the stock remains roughly 51% below its November 2021 IPO-era high of Rs. 152.55.

Market cap buildup	Q4 FY23	Q1 FY24
Share price (period-end)	Rs. 51.00	Rs. 75.05
Shares outstanding	8,364 million	8,400 million
Market capitalization	Rs. 42,656 crore	Rs. 63,042 crore ($7.68B)

A real DCF still isn't credible this quarter. The only annual, audited free-cash-flow data point that exists is still FY23's negative Rs. (947.0) crore, and this quarter's new voluntary quarter-only cash-flow disclosure (see Beyond the Usual) is exactly one data point, not a track record - a positive quarter doesn't yet establish a trend, particularly with a chunk of it explained by a one-time treasury reshuffling. A peer-multiples sanity check remains the workable approach, and there's still no comparably-sized listed pure-play Indian food-delivery-plus-quick-commerce peer.

Peer-multiple sanity check	Q4 FY23	Q1 FY24
Statutory revenue (annualized, this quarter)	Rs. 8,224 crore	Rs. 9,664 crore
Statutory revenue (TTM)	Rs. 7,079.4 crore (FY23 actual)	Rs. 8,081.5 crore
Adjusted Revenue (annualized)	Rs. 9,652 crore	Rs. 11,144 crore
P/S (annualized quarter revenue)	-	6.5x
P/S (FY23 actual / TTM revenue)	6.0x	7.8x
P/S (Adjusted Revenue basis)	4.4x	5.7x

All three readings moved the same direction - up - and by a similar magnitude to the price move itself, which is the more reassuring read: the market re-rated the stock roughly in proportion to a quarter that genuinely delivered on GOV reacceleration, margin improvement, and a first (if tax-credit-assisted) profit, rather than pricing in more optimism than the operating numbers support. That said, a re-rating that's already caught up with the good news leaves less room for the next quarter to disappoint without a real price reaction.

---