“Over the past 3–4 quarters, we saw increasing losses in quick commerce due to pricing wars, heightened competitive intensity, and marketing investments. So, it’s evident that the worst is behind us in terms of profitability and losses. From a medium- to long-term perspective, we expect the breakeven point to return for Blinkit — something we last saw about four quarters ago — along with eventual profitability,” says Karan Taurani, Sr VP, Elara Capital.
What I want to ask you is — while the results have been quite mixed — if you ignore the ad and marketing expenses that weighed on the bottom line and look at the segmental performance, it has been rather strong. That would be my assessment for Elara. Do you concur, especially considering you’ve reiterated your bullish stance and even raised the target price for the stock?
Karan Taurani: Zomato’s performance has been quite steady in terms of numbers. There was a mild beat in the quick commerce business, while the food business was largely in line with expectations. Profitability in the food segment was slightly below our estimates. The losses in quick commerce have remained stable on a QoQ basis, which is a big positive.
Over the past 3–4 quarters, we saw increasing losses in quick commerce due to pricing wars, heightened competitive intensity, and marketing investments. So, it’s evident that the worst is behind us in terms of profitability and losses. From a medium- to long-term perspective, we expect the breakeven point to return for Blinkit — something we last saw about four quarters ago — along with eventual profitability.
Overall, it’s a good set of results. Execution on the quick commerce side, especially on profitability, has been strong. Despite rising competition, they’ve managed to maintain market share. Interestingly, the focus in the food business is shifting back to growth. Earlier, the emphasis was on profitability over growth, but with guidance now suggesting over 20% growth in the food segment from FY27 onwards, confidence in its prospects has grown. This is a marked improvement from the 15–16% GOV growth range we saw 2–3 quarters ago.
So, three key takeaways are acceleration in food business growth, Quick commerce losses bottoming out and margin improvement through the shift from a 3P to a 1P inventory model in QC.
Let’s now deep-dive into each segment. Starting with Zomato — since GOV has been steady at ~16.25% for several quarters — where do you see acceleration coming from, and what are you pencilling in for GOV growth in this segment?
Karan Taurani: For FY26, we expect GOV growth to accelerate. Q1 is typically a seasonally weak quarter, but we still expect growth to come in around 17–18%. For FY27 and beyond, we are projecting around 22% GOV growth, in line with the management’s guidance of 20%.
This growth will be driven by an expanding customer base. Competitive intensity has reduced, and both Zomato and Swiggy are now focusing on driving frequency via loyalty programs. Additionally, the focus is shifting toward expanding into new markets and innovating in the food delivery business. For instance, deliveries within 10 minutes and new propositions like the Bistro format are in play.
So, with innovation, market expansion, and deeper customer penetration, we expect robust growth for the food delivery business in the medium to long term.
Coming to Blinkit — it’s been a strong showing, especially considering their rapid dark store expansion. Despite that, EBITDA losses are improving. Help us understand your projections and what Blinkit is doing right.
Karan Taurani: We’re expecting around 120% YoY growth for Blinkit this year, largely driven by store expansion. Unlike Zomato’s food business, where growth comes from a mix of AOV and frequency, Blinkit’s growth is primarily driven by adding new users and increasing transactions. About 90–95% of Blinkit’s growth is attributed to new customer acquisition.
AOV and frequency remain largely flat, but Blinkit is outperforming peers because of its strong moat — comprising three elements: wide assortments, superior customer experience, and best-in-class delivery times. It also has a stronghold in northern markets where competitors haven’t been able to replicate Blinkit’s offering.
They’ve maintained their target of 2,000 stores by December and have raised the long-term guidance to 3,000 stores in the next two years — reflecting strong confidence in the business.
Crucially, Blinkit is gaining traction in non-metro markets — a space that was earlier viewed skeptically due to concerns about demand and profitability. Now, they’re seeing clear momentum there too. Though AOVs are 10–15% lower in non-metros, the scaling is happening, and the business is moving in the right direction in terms of both growth and profitability.
Given that the stock has remained in a broad range for quite a while, are you revising your price target?
Karan Taurani: Yes, we’ve revised our target upwards from ₹300 to ₹340, and this is based on three factors: Improved growth prospects in the food delivery segment, which warrant better valuations.
Steady growth in the QC business, particularly driven by increased store additions and momentum in non-metro markets. Improving profitability in QC, which leads to re-rating of valuation multiples.
Until 6–8 months ago, the quick commerce space was facing valuation pressure due to new entrants like Amazon, Flipkart, and aggressive pricing from Zepto. That phase of intense competition now seems to be behind us. As a result, we expect a valuation re-rating for the QC segment, which will support overall stock performance. Based on these factors, we’ve raised our target price to ₹340 for Elara.
One final question on profitability. In the last earnings call, the management had clearly stated that growth would take precedence over profitability. That played out this quarter, with profit coming in at just ₹25 crore. Where do you see profit heading next — especially for the overall business?
Karan Taurani: From a consolidated business perspective, profitability visibility has improved across segments. In the events business, management has guided for ~$3 billion in GOV and $150 million in positive EBITDA over the next 3–5 years.
There may be near-term concerns in the Bistro segment due to losses, but overall, profitability isn’t the current focus — especially for quick commerce. Right now, it’s all about gaining and maintaining market share.
That said, QC has stronger profitability levers than the food business — including the potential for higher take rates, better ad revenue, and increased delivery/platform fees once scale is achieved. While we expect breakeven and mild profitability in the near to medium term, the longer-term margins for QC could actually surpass those of the food delivery segment.
So yes, we’re confident that the profitability delta over the next 5–7 years will primarily be driven by the QC business.