Profit decreased... still zomato is investing money in Blinkit!
The shares of food delivery company zomato, listed in the indian stock market, are continuously falling. In the last one month, the company's shares have fallen by more than 25 percent. In fact, the results presented by zomato for the december 2024 quarter did not meet the expectations of the investors. According to this result, while the company's income increased by 13 percent, the profit declined by 66 percent. Since then, the shares have seen a huge decline. However, forgetting this decline, the company is investing heavily in its partner quick-commerce platform Blinkit. Let us understand why zomato is doing this, is there any special strategy behind it?
Money is being invested heavily in Blinkit
zomato has made a big bet on the expansion of Blinkit and plans to increase the number of its dark stores from the current 526 to 1,000 by march 2025. Zomato's gross order value (GOV) grew 120 per cent year-on-year and 27 per cent quarter-on-quarter. However, due to Blinkit's aggressive expansion and increasing competition in the market, its EBITDA loss widened to Rs 103 crore from only Rs 8 crore in the previous quarter. The company's quarterly EBITDA margin also declined from 9 per cent in september 2024 to 7.6 per cent in december 2024. At the same time, Zomato's adjusted EBITDA from the food delivery business stood at Rs 423 crore, up 82 per cent from the previous quarter. In contrast, Blinkit's rising costs are putting pressure on the company's financial health.
zomato shares fall sharply
zomato shares fell by up to 23 per cent last month due to confusion among investors. Its shares fell 7 per cent in the last five days, while the Nifty 50 index fell only 2.3 per cent.
What kind of strategy is this of the company?
The company's CEO Deepinder Goyal clarified that this is a well-thought-out strategy regarding the expansion of Blinkit. He said, "We have already made big investments for quick-commerce, which we had to do in the next few quarters. Now our target is 2,000 dark stores by december 2025, which was earlier by december 2026." Market experts believe that this long-term strategy of zomato can bring success in the indian market, but it will have to face many economic challenges in the near future. The company needs to convert Blinkit's model into profit and balance its investments. This is a challenging time for zomato, but given the growing consumer demand in India, the company has the potential to find new avenues of growth. Now it remains to be seen how successful this big bet made on Blinkit is.
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