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Zomato

Zomato's Q1 FY23 results improved.

Zomato zooms up 20% after stellar Q1 performance.

Zomato zooms up 20% after stellar Q1 performance.

Zomato recorded a net loss of Rs. 186 Cr. in Q1FY23 compared to a net loss of Rs. 356 Cr. YOY. The scrip soared after the results. The revenue from operations was at Rs. 1,413 Cr., up by 67.44% versus 844.4 Cr. in June 2021 due to an increase in orders for meals from the online platform. However, the company’s adjusted revenue increased by 18% quarter on quarter and 56% year on year to Rs 1,810 Cr. in Q1FY23.Its adjusted EBITDA loss was Rs 150 Cr in the June quarter, down from Rs 220 Cr the previous quarter.

The revenue is comprised of mainstream food delivery and related fees it charges restaurants for using its platform. The total order value of all food delivery orders placed online rose for the first quarter by 41.6 % to Rs 643 Cr. YOY, with an average customer of 16.7 million. The margins were negatively impacted due to higher fuel costs and wage inflation as per the management. They also added that the monthly transacting customers were the key driver for volume growth.

The domestic food delivery industry is expected to grow three times over the next five years. With the rising order regularity and user count, we expect Zomato to have 45–50% of the market share.

Future plans for Zomato

The online food delivery company will be internally rebranded by moving to a multiple chief executive structure for its businesses that will be housed under a larger organisation called Eternal. In an internal message to employees, Deepinder Goyal said the company has matured from running a single business to running multiple and large companies. The restructuring is happening after the shareholders approved the Blinkit acquisition. Zomato currently has four companies — Zomato, Blinkit, Hyperpure, and Feeding India. Starting Monday (August 1), the company will call the larger organisation Eternal. The umbrella organisation will be called Eternal and will have four firms-Zomato, Blinkit, HyperPure, and Feeding India. Goyal hinted at a model where the company would get into other businesses.

Deepak Goyal said that there will be multiple CEOs running each other’s businesses and working as a “super-team” towards building a single, large organisation. Zomato has set aside a war chest of $1 billion to invest in multiple start-ups. Zomato has acquired a substantial stake in Mukunda, Curefit, and Magicpin. The restructuring is very important as it hints at a model where the company will do other businesses.

Valuations:

The EPS is currently RS.-0.18. The ROCE and ROE are at -10.1% and -10.2%. The large cap company closed at Rs.55.6, up by 20.9% on Tuesday. The company is also debt free, with a long-term borrowing of Rs. 30 Cr. The stock P/E is 194, which is quite expensive. The P/B ratio for the company is 2.62.