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    Zomato’s BlinkIt Aims for EBITDA Neutrality Amid Growth

    While still a ways from bringing in cash flow, Zomato stated that its quick commerce business BlinkIt will maintain earnings before interests, taxes, depreciation, and amortization (EBITDA) neutrality during its growth. The business recently received the attention of Zomato’s shareholders for making progress on profitability especially in terms of contribution margin. However, one stakeholder during a Q4 meeting noted that BlinkIt still has been negative in terms of cash flow.

    When asked whether the business’s EBITDA performance may change in coming quarters, Albinder Singh Dhindsa, Founder of BlinkIt, said:

    “Our attempt is to keep reinvesting back into the business to grow as fast as possible while maintaining neutrality on the EBITDA side – that’s our strategy. Based on how expansion goes in a particular quarter, the numbers might be up and down, but it will not significantly deviate from our stated objective of remaining at least EBITDA neutral, if not positive.”

    Zomato’s BlinkIt Aims for EBITDA Neutrality Amid Growth

    Here’s how BlinkIt’s expansion of stores may affect future performance

    In the shareholder letter, Zomato talked about the company’s plans to set up  1,000 stores by the end of FY25. In response to this news, investors asked about the move’s impact on company performance. Here are the key takeaways from this discussion:

    Contribution breakeven of increased store count may take more than two months: When asked how much time the new stores would take to breakeven, Dhindsa said that the duration usually varies depending on whether we are opening a store in an existing location or a new location.

    “A lot of our increase is now indexed to the cities which are growing, such as Bengaluru, Hyderabad, Mumbai and a few other cities… We expect that [the time to breakeven] will not increase meaningfully but will be higher than the two months that we have put in our last letter, and we are already accounting for that in our projections as well. But outside of that, what you will see us do more and more is just going into under-penetrated markets in the top four cities and opening more stores over there,” he said.

    GOV unlikely to quadruple in just the next year: Dhindsa said that by the time BlinkIt’s market performance in all cities reaches the performance level of Delhi NCR, the business will have grown four times. However, currently non-Delhi NCR metro markets are significantly underpenetrated and are unlikely to see the aforementioned GOV growth.

    “Even in Bengaluru and Mumbai, we believe we are already the largest player in terms of GOV. The point that we were trying to make in the letter was that there is still a lot of opportunity for us to go to these markets and meaningfully expand because we think that the Delhi NCR market has been able to grow in quick commerce due to the product-market fit and the quality of service that we’ve been able to provide. And we feel that as we touch more customers in these cities with our quality of service, with our selection, the quick commerce market over here will also meaningfully expand to the size of the Delhi NCR market.”

    Zomato talks about future food deliveries plans

    Zomato EveryDay to expand to Mumbai and Bengaluru: Last year, Zomato had introduced ‘Zomato Everyday’ that offers home-style meals cooked by home-chefs, replacing the company’s ten-minute delivery service. When asked about updates regarding this service, Goyal said that the company is currently functional in Gurgaon and appears to have a low AOV use case. However, the service may be offered in Mumbai and Bengaluru as well over the next quarters.

    Zomato’s MTC growth in line with other metrics: While BlinkIt’s monthly transacting customers (MTC) went from 5.4 million users in Q3 to 6.4 million users in Q4, the food delivery business’s MTC only went from 18.8 million users in Q3 to 19 million users in Q4.

    However, according to Akshant Goyal, Zomato’s Chief Financial Officer:

    “Even if you look at the last 12 months, the MTC’s have grown in line with the overall growth in volumes. They’ve grown around 20-odd percent. We expect that as the business GOV continues to grow 20%+ (which we have guided on), that will likely be a combination of some AOV increase and order volume increase and majority of the order volume increase would come from transacting customers growing. So, we expect that to continue.”

    Similarly, the food delivery business’s ATC growth increased by about 10 percent, as per the data pack shared by the company.

    Focus for Hyperpure is not to breakeven

    When asked when the Hyperpure business was likely to breakeven, Dhindsa said the growth rates have come down from 146 percent YoY from Q4FY23 to 99 percent in Q4FY24. The company anticipates this downward trend to continue. Similarly, EBITDA margins have improved from -9 percent in Q4FY23 to -2 percent in Q4FY24.

    “Our focus here right now is not getting to breakeven but continuing to solve for growth in the business. We believe the business is still sub-scale as far as the opportunity is concerned. And hence, while the margin improvement will continue, we are really focused on driving more growth at this point,” said Goyal.

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    The post Zomato’s BlinkIt Aims for EBITDA Neutrality Amid Growth appeared first on MEDIANAMA.

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