hometechnology NewsCan Blinkit be a 'golden egg' for Zomato?

Can Blinkit be a 'golden egg' for Zomato?

Can Blinkit be a 'golden egg' for Zomato?
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By Vahishta Unwalla  Apr 26, 2023 9:28:20 AM IST (Published)

Blinkit could become a successful business for Zomato if it maintains consistent growth in gross order value and profitability in the long term. The integration of Zomato and Blinkit delivery fleet has the potential to result in better delivery management for the company.

Greater convenience, rising digitization, internet penetration and urbanization are among the key factors that led to a boom in the foodtech industry in India. Motilal Oswal expects this industry to clock a rapid 19 percent CAGR over FY23-25, fuelled by growth in the number of transacting users and order frequency. In this duopolistic food delivery market, Zomato with 55 percent share is a prominent player.

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Will Zomato be able to sustain in a highly competitive foodtech industry?
Limited distinction between Zomato and Swiggy’s offerings – both having food delivery, dine-in and quick commerce are a concern for Zomato’s overall growth. A split market without a clear leader can hit margins due to absence of efficiency gains from order bunching. Hence, food delivery brands like TinyOwl, UberEats, foodpanda failed to create a mark in the longer term. However, Zomato and Swiggy survived due to a strong network, continuous operating leverage and increased pricing power.
Zomato’s food business recorded EBITDA breakeven in Q1FY23 and management expects it to be profitable latest by Q2FY24. Though Blinkit is scaling up well and improving on profitability, the industry is at a nascent stage today for Zomato, given the large number of players in the ecosystem.
Zomato's fourth quarter earnings for financial year 2022-23 are due in May 2023. Kotak Institutional Equities expects tepid 2.2 percent quarter-on-quarter revenue growth to Rs 1,990 crore  on account of lower food delivery orders, offset by contribution from the Blinkit business. ICICI Securities estimates food delivery GOV to remain flat sequentially given a seasonally weaker quarter and online consumption fatigue trends which means adjusted revenue growth of 9.5 percent quarter-on-quarter.
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