ETERNAL The Tax-Credit Asterisk Is Gone - So What's Still Not Adding Up?

A Second Profitable Quarter, This Time Without the Tax-Credit Crutch

This is Zomato's tenth quarter as a public company - Q2 FY24 (quarter ended September 30, 2023), reviewed not audited, board-approved on November 3, 2023. Last quarter's headline profit came with a real asterisk: net profit was positive only because a Rs. 17 crore deferred tax credit flattered an underlying business that was still, on a pre-tax basis, losing money. That asterisk is gone this quarter. Loss before tax flipped to Profit before tax of +Rs. 21 crore - the first time in the company's history as a listed entity that the pre-tax business itself was profitable, before any tax-line help. Net profit came in at +Rs. 36 crore, still assisted by a further Rs. 15 crore net tax credit on top of that, but this time the credit is amplifying a real profit, not manufacturing one out of a loss. Adjusted EBITDA, management's preferred non-GAAP measure, came in at +Rs. 41 crore - up from +Rs. 12 crore last quarter and a genuine second consecutive profitable quarter, a fact CFO Akshant Goyal's letter leads with instead of the tax-flattered PAT number this time.

The operating story underneath is just as strong as the accounting one. Food delivery GOV^» grew a further 9% QoQ (20% YoY) to Rs. 7,980 crore, continuing last quarter's reversal of the prior demand slowdown, while Zomato Gold's membership base nearly doubled to 3.8 million and now drives ~40% of food-delivery GOV (up from 30%+ last quarter). Quick commerce staged the sharper comeback: Blinkit's GOV grew 29% QoQ (86% YoY), a full reversal of last quarter's self-inflicted disruption, and its Contribution^» margin turned positive for the full quarter this time (+1.3% of GOV, +Rs. 36 crore) - resolving the exact caveat flagged last quarter, when the milestone held only for the single month of June. Management also delivered on its promise from last quarter: "Going-out" (dining-out plus Zomato Live) now reports as its own segment, already Adjusted-EBITDA-positive. Not everything resolved cleanly, though - see Beyond the Usual for a subsidiary audit-scope question that quietly reappeared exactly where last quarter's post said it wouldn't.

The Prescription

Keep running the same two-part playbook that's now delivered two straight profitable quarters: Zomato Gold for order-frequency growth without proportional fixed-cost growth, and the newly introduced Rs. 2-5 per-order platform fee, a small but genuine monetization lever levied on every food-delivery order (including Gold members') starting this quarter. Both are durable, low-drama mechanics rather than one-off wins, and food delivery's Contribution margin has now improved every quarter since Q3 FY23 (5.1%→6.6% of GOV) despite Gold orders being structurally less profitable than non-Gold ones - proof the underlying efficiency gains are outrunning the mix dilution, not just offsetting it.

Stop re-accelerating Blinkit's dark-store rollout right as its unit economics cross into positive territory. Blinkit added just 6 net new stores in Q1 FY24 but 28 in Q2 FY24 - a sudden acceleration in the same quarter Contribution turned positive for the first time on a full-quarter basis. Management is right that new-store economics matter less than whether existing stores keep making more Contribution profit, but stacking a fresh cohort of unproven stores onto a business that has proven positive Contribution for exactly one quarter, not several, is the same risk flagged last quarter - just with a bigger number behind it now that management is guiding to ~100 net new stores for the full fiscal year (only 34 done at the halfway point, see Beyond the Usual).

Key Financial Metrics

Q2 FY24 (quarter ended September 30, 2023) vs Q1 FY24 (quarter ended June 30, 2023) and Q2 FY23 (quarter ended September 30, 2022) - consolidated, reported in INR crore and USD (converted at the fiscal-quarter-end rate of Rs. 83.19/$1 for Q2 FY24, Rs. 82.08/$1 for Q1 FY24, and Rs. 81.48/$1 for Q2 FY23)

Metric	Q2 FY24	Q1 FY24	QoQ	Q2 FY23	YoY
Revenue from Operations	Rs. 2,848 crore ($342.3M)	Rs. 2,416 crore ($294.4M)	✅ +17.9%	Rs. 1,661 crore ($203.9M)	✅ +71.5%
Adjusted Revenue (management non-GAAP)	Rs. 3,227 crore ($387.9M)	Rs. 2,786 crore ($339.4M)	✅ +15.8%	Rs. 2,107 crore ($258.6M)	✅ +53.1%
Segment Result (aggregate, pre-corporate-cost)	Rs. 85 crore ($10.2M)	Rs. 52 crore ($6.3M)	✅ +63.5%	n/a (segment structure not comparable)	n/a
Operating Income (Profit/Loss before tax)	✅ +Rs. 21 crore ($2.5M)	Rs. (15) crore $(1.8)M	✅ swung to profit	Rs. (261) crore $(32.0)M	✅ swung to profit
Net Income (Profit/Loss for the period)	✅ +Rs. 36 crore ($4.3M)	+Rs. 2 crore ($0.2M)	✅ +Rs. 34 crore (18x)	Rs. (251) crore $(30.8)M	✅ swung to profit
Adjusted EBITDA (management non-GAAP)	✅ +Rs. 41 crore ($4.9M)	+Rs. 12 crore ($1.5M)	✅ +Rs. 29 crore	Rs. (192) crore $(23.6)M	✅ swung to profit

The number that actually matters this quarter sits above Net Income in the table: Profit before tax turning positive (+Rs. 21 crore, from Rs. (15) crore last quarter) means the underlying, pre-tax business crossed into profitability for the first time - not just the tax-assisted headline number. Net profit is still boosted by a Rs. 15 crore net tax credit (Rs. 1 crore current tax expense against a Rs. 16 crore deferred tax credit), so the Rs. 36 crore net profit figure isn't purely operating profit either - but the milestone is now real two layers deep instead of one. Total comprehensive income (which nets in other comprehensive income, mostly mark-to-market losses on debt/equity investments this quarter) was Rs. (1) crore, down from +Rs. 43 crore last quarter, entirely on account of a Rs. 37 crore OCI swing rather than anything in the operating numbers.

Key Operational Metrics

• B2C GOV (food delivery + quick commerce + Going-out): ✅ Rs. 11,422 crore, +13% QoQ / +47% YoY
• India food delivery GOV: ✅ Rs. 7,980 crore, +9% QoQ / +20% YoY - order-volume growth (not average order value) drove nearly all of it, helped by a visible demand uptick and, per management, better execution around the seasonal drag of monsoon-period delivery-partner shortages
• Zomato Gold membership: ✅ 3.8 million members (up from "30%+ of GOV" last quarter, now ~40% of food-delivery GOV), scaled in just three quarters since launch
• Food delivery Contribution margin (% of GOV): ✅ 6.6%, up from 6.4% last quarter - the sixth straight quarterly improvement, now above management's own 4-5% medium-term Adjusted EBITDA margin target on a Contribution basis
• Food delivery Adjusted EBITDA margin (% of GOV): ✅ 2.6%, up from 2.5% last quarter
• Average monthly transacting customers (food delivery): ✅ 18.4 million, up from 17.5 million last quarter
• New platform fee: starting this quarter, every food-delivery order (including Zomato Gold members') carries a nominal Rs. 2-5 platform fee - a new, small monetization lever not previously disclosed
• Hyperpure revenue: ✅ Rs. 745 crore, +20.7% QoQ, +123% YoY; Adjusted EBITDA margin improved to -5% of revenue from -6%, continuing the minimum-order-value and supply-chain efficiency discipline flagged last quarter
• Quick commerce (Blinkit) GOV: ✅ Rs. 2,760 crore, +29% QoQ / +86% YoY - a full rebound from last quarter's self-inflicted, delivery-partner-payout-driven slowdown
• Blinkit Contribution margin (% of GOV): ✅ +1.3% (+Rs. 36 crore) - positive for the entire quarter, not just one month (see Beyond the Usual)
• Blinkit Adjusted EBITDA margin (% of GOV): ✅ improved to -4.5% from -6.2% last quarter
• Blinkit average order value: ✅ Rs. 607, up from Rs. 582 last quarter - and this time order volumes grew too (36.8 million → 45.5 million), unlike last quarter's AOV-for-volume trade-off
• Blinkit stores: ⚠️ 411 at quarter-end, up from 383 - only 34 net new stores added in H1 FY24 against management's ~100-net-new-store target for the full fiscal year (see Beyond the Usual)
• Going-out GOV: Rs. 682 crore, +11% QoQ / +129% YoY, now its own reportable segment (see below)
• Consolidated cash balance (management's broader non-GAAP measure): increased Rs. 188 crore during the quarter, per the shareholder letter's Adjusted-EBITDA-to-cash bridge

Segment Results

Zomato now reports five business-line segments - India food ordering and delivery, Hyperpure (B2B restaurant supply), Quick commerce (Blinkit), Going-out (dining-out plus Zomato Live, newly broken out this quarter as promised last quarter), and All other segments (residual). Segment result is operating profit/loss before unallocated corporate costs, other income, share-based payment expense, finance costs, and exceptional items.

Segment	Revenue (Q2 FY24)	QoQ	Segment Result (Q2 FY24)	Q1 FY24 Result
India food ordering and delivery	Rs. 1,548 crore ($186.1M)	✅ +12.6%	✅ Rs. 210 crore (profit)	Rs. 186 crore
Hyperpure	Rs. 745 crore ($89.6M)	✅ +20.7%	⚠️ Rs. (28) crore	Rs. (29) crore
Quick commerce (Blinkit)	Rs. 507 crore ($61.0M)	✅ +31.7%	⚠️ Rs. (94) crore	Rs. (105) crore
Going-out	Rs. 49 crore ($5.9M)	n/a (newly separated)	✅ Rs. 2 crore (profit)	n/a
All other segments (residual)	Rs. 7 crore ($0.8M)	n/a (newly separated)	⚠️ Rs. (5) crore	n/a
Total (segment result, before finance costs/unallocated items)	Rs. 2,856 crore gross ($343.3M)		Rs. 85 crore	Rs. 52 crore

Every segment that's comparable QoQ improved again, extending last quarter's clean sweep. India food ordering and delivery posted Rs. 210 crore of segment profit, up 12.9% on last quarter's own record, on the GOV and Contribution-margin gains detailed above. Hyperpure narrowed its loss marginally to Rs. 28 crore even as revenue grew 20.7% QoQ, continuing the pattern of a shrinking absolute loss against a fast-compounding top line. Quick commerce narrowed its loss to Rs. 94 crore from Rs. 105 crore, a smaller improvement in absolute terms than its 29% GOV growth alone might suggest - Blinkit is still investing behind rapid store growth even as unit economics improve (see Beyond the Usual). Going-out, now standing on its own for the first time, is already Adjusted-EBITDA-positive at Rs. 2 crore on Rs. 49 crore of revenue - a promising start for the newest segment, though the figure isn't comparable to last quarter's combined "All other segments" line, which bundled Going-out with the smaller residual bucket that's now reported separately at Rs. (5) crore.

Segment revenue in this table is gross, pre-inter-segment-elimination (Rs. 2,856 crore, versus Rs. 8 crore of inter-segment revenue eliminated to reach the Rs. 2,848 crore statutory Revenue from Operations figure used elsewhere in this post) - the same presentation convention preserved from prior quarters' segment footnote.

Beyond the Usual

As in every prior interim quarter, this quarter's regulatory XBRL filing carries almost no footnotes beyond a bare exceptional-items note and a brief segment-disclosure note - footnotes only arrive with the annual filing. Most of what follows instead comes from the shareholder letter, the presentation deck's own disclosures, and - unusually - the independent auditor's own review report bundled into the presentation, which is where the most interesting finding this quarter actually surfaced.

A subsidiary audit-scope question resurfaces in an interim filing - contradicting last quarter's own framing that this was year-end-only

Every prior post flagged that certain subsidiaries' financial results sit outside Deloitte's own direct review scope, and last quarter's post explicitly stated this thread "will next be checkable at the FY24 year-end filing... a structural gap in visibility, not a resolved one" - on the assumption that interim (non-year-end) filings carry no such disclosure at all. That assumption turns out to be wrong: this quarter's own auditor's review report discloses that two subsidiaries' results, reflecting total assets of Rs. 2,735 crore and quarterly revenue of Rs. 1,251 crore, were reviewed by "other auditors" rather than Deloitte directly - a disclosure that clearly can and does appear at the interim stage, not only at year-end as previously assumed. The report doesn't name which two subsidiaries these are, but the scale (well above Hyperpure's or the smaller entities' size) is consistent with Blink Commerce Private Limited (Blinkit) being one of them, continuing the exact pattern flagged in every quarter since Blinkit's consolidation began. The standing question - why Zomato's largest and fastest-growing subsidiary still isn't reviewed by the principal auditor itself, more than a year after acquisition - remains open, and now it's clear this could have been checked every quarter all along.

Blinkit's dark-store rollout is running well behind its own full-year guidance at the halfway point

Management has guided to at least 100 net new Blinkit stores in FY24, exiting March 2024 with roughly 480 stores. Through the first half of the fiscal year, the network grew by only 34 net new stores (377 at FY23 year-end → 411 at Q2 FY24-end - 6 added in Q1, a sharp 28 added in Q2). Hitting the full-year target now requires roughly 66 net new stores in H2 FY24, nearly double the pace of H1 - a real second-half acceleration bet, not a formality. Management's own framing (in response to an analyst question this quarter) is that Adjusted EBITDA margin should keep improving even through this expansion, since it's a weighted average of increasingly profitable existing stores and a manageable drag from new ones - a reasonable model in principle, but one that hasn't yet been tested at the pace of store growth still required to hit the FY24 number.

Zomato launched the promised "Going-out" segment exactly as flagged last quarter - and it's already profitable

Last quarter's post noted that management planned to break dining-out and Zomato Live out into a standalone "Going-out" segment starting this quarter. That happened on schedule: Going-out now reports Rs. 49 crore of quarterly revenue and, notably, is already Adjusted-EBITDA-positive at Rs. 2 crore (a 0.1% margin on Rs. 682 crore of GOV) in its very first quarter as a standalone line - a much faster path to profitability than either food delivery or quick commerce took as standalone segments.

A new, small platform fee was introduced this quarter with no fanfare

Starting this quarter, Zomato began charging a nominal Rs. 2-5 platform fee on every food-delivery order, including orders placed by Zomato Gold members (who otherwise get free delivery and other program benefits). Management frames it plainly as a step "to make our economics better and viable in the long run." It's a small, unheadlined change - not mentioned in the shareholder letter's opening summary, only surfacing in the Q&A section - but it's a genuine new monetization lever layered directly onto the highest-frequency part of the business.

Blinkit's average-order-value-versus-volume trade-off, flagged as a concern last quarter, didn't recur

Last quarter's post flagged that Blinkit's rising average order value (Rs. 522 → Rs. 582) came at the cost of falling order volumes (39.2 million → 36.8 million) - a genuine trade-off caused by the delivery-partner-payout disruption. This quarter, both metrics rose together: AOV increased again to Rs. 607 while order volumes rebounded sharply to 45.5 million. Management attributes part of the AOV increase to a genuine mix shift toward higher-average-selling-price categories (electronics, toys, books, beauty, home décor) rather than customers simply ordering less - a healthier read on the metric than last quarter's disruption-driven version.

Target Valuation Range

The market now prices Zomato at Rs. 85,768 crore, roughly 6.6x-9.3x revenue (Adjusted Revenue basis to trailing-twelve-month statutory revenue basis) - a rerating that's now running somewhat ahead of the fundamentals, not just alongside them - the stock is up 35% this quarter against 18% revenue growth, roughly double the gap seen last quarter, worth treating as a caution flag rather than an alarm.

Zomato's shares closed at Rs. 101.50 on September 29, 2023, up 35.2% from the Rs. 75.05 close at the end of Q1 FY24 - a second straight sharp quarterly gain, building on last quarter's 47.2% move, and now roughly 33.5% below the stock's November 2021 IPO-era high of Rs. 152.55 (no stock split has occurred between this quarter and today, so the historical prices in this post are on a like-for-like nominal basis, not split-adjusted).

Market cap buildup	Q1 FY24	Q2 FY24
Share price (period-end)	Rs. 75.05	Rs. 101.50
Shares outstanding	8,400 million	~8,450 million
Market capitalization	Rs. 63,042 crore	Rs. 85,768 crore ($10.31B)

A real DCF still isn't credible. This quarter's regulatory cash-flow statement, like every interim filing before Q1 FY24's voluntary one-off, only discloses the cumulative six-month (H1 FY24) period rather than the quarter alone - net cash generated from operating activities of Rs. 288 crore against roughly Rs. 67 crore of capex for H1, implying (by subtracting Q1 FY24's separately disclosed Rs. 69 crore/Rs. 29 crore figures) a derived, not company-disclosed, Q2-only free cash flow of roughly Rs. 181 crore. That's a second FCF-positive quarter in a row on this estimate, but a two-quarter derived trend still isn't enough of a track record for a credible DCF, particularly with the derivation itself depending on subtraction rather than direct disclosure. A peer-multiples sanity check remains the workable approach - there's still no comparably-sized listed pure-play Indian food-delivery-plus-quick-commerce peer.

Peer-multiple sanity check	Q1 FY24	Q2 FY24
Statutory revenue (annualized)	Rs. 9,664 crore	Rs. 11,392 crore
Statutory revenue (TTM)	Rs. 8,081.5 crore	Rs. 9,268 crore
Adjusted Revenue (annualized)	Rs. 11,144 crore	Rs. 12,908 crore
P/S (annualized quarter revenue)	6.5x	7.5x
P/S (TTM revenue)	7.8x	9.3x
P/S (Adjusted Revenue basis)	5.7x	6.6x

Unlike last quarter, where the price move and the P/S re-rating moved together almost one-for-one, this quarter's 35% price gain outpaced 18% QoQ revenue growth by a wide enough margin that all three multiples expanded meaningfully in their own right - the market isn't just pricing in this quarter's real operating improvement, it's also pricing in some expectation of more to come. That's not unreasonable given two straight profitable quarters, but it does mean less of the next quarter's disappointment, if there is one, gets absorbed by valuation room already used up.

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