Thursday, February 13, 2025

Zomato Keeps Investing in Blinkit Despite Losses: What’s the Strategy?

Zomato, a popular food delivery company listed on the Indian stock market, has seen a continuous drop in its share prices. Over the past month, its shares have fallen by more than 25%. The main reason is the company’s disappointing financial results for the December 2024 quarter.

Mixed Financial Results

According to the report, while Zomato’s revenue grew by 13%, its profits dropped by 66%. This decline led to a sharp fall in share prices. However, instead of focusing on the loss, Zomato is heavily investing in its quick-commerce platform Blinkit.

Heavy Investment in Blinkit

Zomato has planned to increase Blinkit’s dark stores from 526 to 1,000 by March 2025. This aggressive expansion strategy resulted in a 120% annual growth in gross order value (GOV) and a 27% increase compared to the previous quarter.

However, the rapid expansion has also increased Blinkit’s losses. The EBITDA loss jumped from ₹8 crore in the previous quarter to ₹103 crore. Zomato’s overall EBITDA margin fell from 9% in September 2024 to 7.6% in December 2024.

Decline in Share Prices

Due to investor concerns, Zomato’s share prices have dropped by 23% in the past month. Over the last five days alone, the stock has fallen by 7%, while the Nifty 50 index declined by only 2.3%.

What is Zomato’s Strategy?

Zomato CEO Deepinder Goyal explained that the heavy investment in Blinkit is a planned move. He said, “We have made early investments in quick-commerce, which were originally planned for the next few quarters. Now, we aim to have 2,000 dark stores by December 2025 instead of December 2026.”

Expert Opinions

Market experts believe that this long-term strategy might help Zomato succeed in the Indian market. However, the company faces immediate financial challenges. Turning Blinkit profitable and balancing its investments will be key for Zomato.

Despite the current challenges, India’s growing consumer demand offers new opportunities. Only time will tell whether Zomato’s big bet on Blinkit will be successful.

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