ICICI Securities Zomato Company Update

BUY (Maintained) 
CMP: INR 174 Target Price: INR 300 (INR 182)  72% ICICI Securities Limited is the author and distributor of this report
25 March 2024 India | Equity Research | Company Update
Zomato
Internet
Decoding Zomato #2 : Five more key questions answered; Re-iterate BUY, TP INR 300
Our thesis on profitability improvement in Zomato (link) has played out. Stock is up>70% in the last 6 months. Now the
investment thesis pivots to the longer term growth outlook. In this note, we have tried to answer five more key investor
questions. We analysed NSSO data from FY94-23 to create a proprietary model for online consumption growth in India:
(link). We also carried out 2nd iteration of our bi-annual restaurant survey (220 restaurants across 40 cities: link). Our
key findings: 1) Advertising intensity across restaurants continues to grow still (up to 63% in Mar’24 vs 53% in Sep’23),
2) Advertiser satisfaction has also improved (91% in Mar’24 vs 88% in Sep’23), 3) Our model predicts food delivery can
grow >20% YoY FY24-FY33E, 4) Our model predicts quick commerce can grow >29% YoY FY24-FY33E. Re-iterate BUY.
Food: How big can it be? Where will EBITDA margin stabilise? Abhisek Banerjee
Our proprietary model predicts that the food delivery market can grow at [email protected]
CAGR>20%YoY to reach USD40bn in FY33E (FY24E ~USD7bn). This implies +91 22 6807 7574
that Zomato food business GOV can grow >20%YoY till FY33E even if there is Manoj Menon
[email protected]
no material gain in market share. This is not something we understood earlier.
Pradyut Ganesh
We had built in Zomato food GOV CAGR for FY24-33E of 15.3% YoY earlier.
[email protected]
Now, we are building in a food GOV CAGR of 21.1% YoY over FY24-33E.
Resultant, we have revised our food delivery revenue CAGR for FY24-33E from
17.0%YoY to 22.3%YoY.
We believe food delivery EBITDA margin should stabilise at around 6% of Market Data
GOV. Below is our estimate of food delivery margin profile. We think ad- Market Cap (INR) 1,536bn
revenues should continue to drive up food delivery take rates over the medium Market Cap (USD) 18,368mn
term, before it stabilises at around 21%. This should drive up contribution Bloomberg Code ZOMATO IN
margin to 8.5%. Post that, EBITDA margin expansion would be driven by scale Reuters Code ZOMT BO
benefits as corporate overheads would grow slower than revenues. (more) 52-week Range (INR) 176 /49
Free Float (%) 68.0
QC: How big can it be? Where will EBITDA margin stabilise? ADTV-3M (mn) (USD) 120.7
Our proprietary model predicts quick commerce market can grow at
CAGR>29%YoY to reach USD36bn in FY33E (FY24E ~USD3.6bn). This implies Price Performance (%) 3m 6m 12m
that Blinkit GOV can grow >29%YoY till FY33E even if there is no material gain Absolute 35.6 74.4 228.1
in market share. This is not something we understood earlier. We had built in Relative to Sensex 33.1 64.0 203.0
Blinkit GOV CAGR for FY24-33E of 24.2% YoY earlier. Now, we are building in
a Blinkit GOV CAGR of 29.1% YoY over FY24-33E. Resultant, we have revised
our Blinkit revenue CAGR for FY24-33E from 25.9%YoY to 31.1%YoY.
Earnings Revisions (%) FY25E FY26E
Financial Summary Revenue 6.0 7.6
Y/E March (INR mn) FY23A FY24E FY25E FY26E Adj. EBITDA (3.6) (3.7)
Net Revenue 70,794 1,31,337 1,77,424 2,21,249
EPS (5.7) (4.8)
Adj. EBITDA (7,045) 3,625 20,138 35,878
Adj. EBITDA Margin (%) (10.0) 2.8 11.4 16.2
Net Profit (9,720) 2,094 13,923 28,023
EPS (INR) (1.2) 0.2 1.6 3.3
EPS % Chg YoY - - 564.9 101.3
P/E (x) (145.2) 703.0 105.7 52.5
EV/EBITDA (x) (192.1) 385.5 68.2 37.4 Previous Reports
RoCE (%) (8.6) (2.3) 4.0 9.5 09-02-2024: Q3FY24 results review
RoE (%) (5.4) 1.1 6.7 12.1 06-11-2023: Q2FY24 results review
11-10-2023: Company update
Please refer to important disclosures at the end of this report

Zomato | Company Update | 25 March 2024
We believe EBITDA margin for Blinkit should stabilise at around 4.8% of GOV. We note
a higher headroom for take rate improvement in this business given two drivers that is
1) ad-revenue growth and 2) mix improvement, which have been called out by the
company as well. (more)
Can competition pose a significant threat to the business models?

Food delivery is now reasonably established as a ‘duopoly of scale’ given multiple
attempts to disrupt the food delivery business have already fizzled out. A case could
be made for a new entrant into quick commerce, given the localised nature of the
business and the relative success of ‘Zepto’. However, Zepto’s playbook will be difficult
for large companies to replicate as evidenced by multiple exits from the space. (more)
What is the investment thesis behind ‘Hyperpure’ and ‘Going out’?

Hyperpure has scaled rapidly but it is unlikely to be comparable to food delivery or
quick commerce in the foreseeable future. Our channel checks suggest that Hyperpure
is actually a strategic initiative to deepen their relationship with restaurants. These
services are specially appreciated by restaurants who compete with the large QSR
chains (pizza, burger etc). The ‘going out’ business is being developed to create a more
holistic offering to ‘dining out’ clients and to increase wallet share from existing
customers. However, scalability is likely to take time in our view. (more)
Are the ‘rich valuations’ justified?

We note that Zomato is at present trading at a premium to global peers, which we
think is justified given the significantly higher revenue and EBITDA CAGRs. Also,
Zomato stock movement has been exactly in line with that of Doordash over the last
6month period, which in our view is indicative of improving investor sentiment towards
consumer tech stocks globally. In fact, even at our target price of INR300, we value the
food delivery business at 60x 1yr fwd EV/EBITDA and Blinkit at 85x 1 yr fwd
EV/EBITDA. These multiples, though elevated have in the past sustained for fast
growing consumer franchises in India. (more)
Upcoming triggers for the stock

The potential upcoming triggers for the stock include: 1) Food delivery adj. EBITDA
margin crossing 4% of GOV watermark (3-4 months), 2) Market share gains in food
delivery in Hindi heartland states given the ‘veg only’ delivery fleet (3-4 months), 3)
Quick commerce turning profitable at the adj EBITDA level (3-6 months) and 4) Fed
rate cuts which could trigger large FII inflows into the stock (6-12 months).
Risk-reward skew (3.9:1) to the upside

Despite the recent rally in the share price, we think that the risk reward skew remains
compelling for Zomato, given the strong improvement in underlying metrics over the
period. We see the stock trading at INR350 per share in our bull-case scenario and
INR128 in our bear-case, implying a risk reward skew of 3.9:1 to the upside. (more)
Valuation
We re-iterate our BUY rating on Zomato and increase our 3-stage DCF-based target
price to INR 300 from INR 182 as we significantly increase our long term explicit
forecasts, given the improved visibility on sustained growth trajectory and sustained
improvement in profitability metrics. Zomato remains our top pick in the Indian internet
space. We have also reduced our WACC to 12% from 12.5% earlier given the drastic
reduction in volatility over the last 1 year.
Key risks: Slowdown in discretionary spending, negative externalities disrupting
business operations.
India | Equity Research 2

Food delivery
How big can it be?
Our proprietary model predicts food delivery market can grow at CAGR>20%YoY to
reach USD40bn in FY33E (FY24E ~USD7bn).
This implies that Zomato food business GOV can grow >20%YoY till FY33E even if
there is no material gain in market share.
This is not something we understood earlier. We had built in Zomato food GOV CAGR
for FY24-33E of 15.3% YoY earlier. Now, we are building in a food GOV CAGR of 21.1%
YoY over FY24-33E.
Resultant, we have revised our food delivery revenue CAGR for FY24-33E from
17.0%YoY to 22.3%YoY.
Evidence
Kitchen is slowly dying in ‘urban elite’ households
beverages, processed food#, etc. cereal
egg, fish & meat milk and milk products
edible oil
3000 2,623
2500
2000 1,383
1500
1,002
782
1000 533 651
416 500
262 302 358
500 186
0
20-30%ile
30-40%ile
40-50%ile
80-90%ile
90-95%ile
95-100%ile
10-20%ile
0-5%ile
5-10%ile
50-60%ile
60-70%ile
70-80%ile
Source: I-Sec research
The above chart shows that while the beverages, processed food category shows a
sharp pick up as we move from the 90-95%ile (11th) to 95-100%ile(12th), however other
categories of food consumption such as staples etc which are needed for preparing
meals in the kitchen have declined.
The next 2 fractiles: 90-95%ile(11th) and the 80-90%ile(10th) are also food delivery
‘regular consumers’ as of present. Our model predicts that the next two fractiles, that
is the 70-80%ile (9th) and 60-70%ile (8th) are growing quickly and should enter the
‘regular consumer’ space by FY33E.
The 10th fractile should become ‘regular consumers’ by FY31E.
The 9th fractile should become ‘regular consumers’ by FY33E.

Fractile wise real growth rates of the Years to progress from one fractile to the next
beverages, processed food category FY12-23E
8% 20 19
6.8% 6.6% 18
7% 6.3%
6.0% 16
6% 5.6%
5.3% 5.1%
4.8% 14
5% 4.5%
4.2% 12
4% 3.5% 10 8
3% 8
5 6
1.8% 6 4 4
2% 3
4 2 3 3
1% 1
2
0% 0
95-100%ile
20-30%ile
30-40%ile
40-50%ile
80-90%ile
90-95%ile
2nd to 3rd
1st to 2nd
3rd to 4th
4th to 5th
5th to 6th
6th to 7th
7th to 8th
8th to 9th
9th to 10th
10th to 11th
11th to 12th
10-20%ile
50-60%ile
60-70%ile
70-80%ile
0-5%ile
5-10%ile
Source: I-Sec research Source: I-Sec research
Sizing the food delivery market opportunity in FY33E

We estimate the total food delivery market at INR 3.2tn in FY33E at a FY23-FY33E CAGR of 21.0%YoY
Total
Food delivery as a Total spending
Spend per Number of People per spending per
Fractile proportion of bev Persons per month (in
person hhs ('000) hh annum (in INR
category INR bn)
bn)
FY23
95-100%ile 37.0% 971 9,123 2.8 25,807 25 301
90-95%ile 33.0% 456 8,661 3.0 25,815 12 141
80-90%ile 6.0% 60 16,516 3.1 51,616 3 37
Total market size 34,300 1,03,237 40 479
FY24E
95-100%ile 41.0% 1,147 9,242 2.8 26,142 30 360
90-95%ile 36.5% 545 8,774 3.0 26,150 14 171
80-90%ile 6.5% 71 16,731 3.1 52,287 4 44
FY33E
95-100%ile 60% 3,260 11,746 2.5 29,365 96 1,149
90-95%ile 55% 1,799 10,491 2.8 29,374 53 634
80-90%ile 45% 1,168 19,578 3.0 58,733 69 823
70-80%ile 30% 627 18,950 3.1 58,745 37 442
60-70%ile 15% 267 17,797 3.3 58,730 16 188
Total market size 78,561 2,34,946 270 3,236
How will the market evolve?

Market share by fractile evolution (industry) MTU share by fractile evolution (industry)
5.8%
95-100%ile 90-95%ile 80-90%ile 70-80%ile 60-70%ile
13.7%
80
7.7% 35.5% 70 10.7
60
29.7% 14.2
FY33E 50
62.6%
40 19.6
25.4%
30
8.0 12.6
20
8.0
19.6% 10
12.0 16.4
95-100%ile 90-95%ile 80-90%ile 70-80%ile 60-70%ile 0
FY24E FY33E
Source: ISec research Source: ISec research

AOV evolution FY24E-FY33E
FY24E FY33E
700
626 605
575 590
600 546
492
500 440
414
390
400
300
300
200
100
0
95-100%ile 90-95%ile 80-90%ile 70-80%ile 60-70%ile Overall
Output
Zomato food delivery KPI evolution and revenue trajectory.
Food delivery KPI evolution Food delivery revenue trajectory
MTU Ordering frequency (per month) FY24E-33E
50 46.7 mn 22.4% 22.3%

45 22.2%
40 22.0%
35 21.8%
30 21.6%
25 21.4%
18.4 mn 21.1%
20 21.2%
15 21.0%
10 20.8%
3.5 4.8
20.6%
5
20.4%
0
GOV CAGR Food delivery revenue CAGR
FY24E FY33E
(ex fees)

Where will EBITDA margin stabilise?

We believe food delivery EBITDA margin for Zomato should stabilise at around 6%
of GOV. Below is our estimate of food delivery margin profile.
Scale benefits to drive EBITDA profile beyond FY26E
Take rate (%) Contribution as a % of GOV

Corp overheads as a % of GOV Adjusted EBITDA as a % of GOV
25.0%
20.5% 20.6% 20.7% 20.8% 20.9% 21.0% 21.1% 21.2% 21.3%
19.5%
20.0%
15.0%
10.0%
5.3% 5.4% 5.5% 5.6% 5.8% 5.9% 6.0% 6.1%
4.2%
5.0% 2.5%
0.0%
FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E FY32E FY33E
Our survey results indicate that median commissions (as visible to restaurants) have
remained stable at 23% over the last 6 months. We think this is likely to remain broadly
stable at current levels though new restaurants are being added at higher commission
structures which could result in some upward movement in blended commissions.
Median commission structure Some signs of standardisation evident
25.0% Sep'23 Mar'24

23% 23%
50.0% 48.2%
44.5%
20.0% 45.0%
40.0%
15.0% 35.0%
30.0%
30.0%
24.5%
10.0% 25.0% 20.5%
20.0% 16.8%
5.0% 15.0% 10.5%

10.0%
5.0%
5.0%
0.0%
Sep'23 Mar'24 0.0%
<=20% >20% & <25% >=25% Can't reveal
However, ad revenue intensity has increased significantly over the last 6 months. 63%
of restaurants admitted to advertising on food aggregator platforms in Mar’24 vs 53%
in Sep’23. Even user experience has improved from 88.1% positive experience to 90.7%
positive experience.

More restaurants advertising now Positive experience from advertising

5.7%
3.6%
9.3%
17.9% 9.3% 8.5%

37%
2.5
%
47%
Mar'24 Sep'23 53% Mar'24 4.2%
Sep'23
63%
75.4%
63.6%
Very useful Useful Somewhat useful
Advertisers Non-advertisers
Not much useful Absolutely not useful
We think ad-revenues should continue to drive up food delivery take rates over the
medium term, before it stabilises at around 21%. This should drive up contribution
margin to 8.5%. Post that, we expect most of EBITDA margin expansion from scale
benefits as corporate overheads would grow slower than revenues.

Quick Commerce
How big can it be?
Our proprietary model predicts quick commerce market can grow at CAGR>29%YoY
to reach USD 36bn in FY33E (FY24E ~USD 3.6bn).
This implies that Blinkit GOV can grow >29%YoY till FY33E even if there is no material
gain in market share.
This is not something we understood earlier. We had built in Blinkit GOV CAGR for
FY24-33E of 24.2% YoY earlier. Now, we are building in a Blinkit GOV CAGR of 29.1%
YoY over FY24-33E.
Resultant, we have revised our Blinkit revenue CAGR for FY24-33E from 25.9%YoY to
31.1%YoY.
Evidence
Among the grocery adjacent categories, durables have grown fastest
Grocery (food) Grocery (non food)

Grocery (pan, tobacco products and alcohol) Discretionary categories
5000
4000
3000
2000
1000
0
20-30%ile
30-40%ile
40-50%ile
80-90%ile
90-95%ile
95-100%ile
10-20%ile
60-70%ile
0-5%ile
5-10%ile
50-60%ile
70-80%ile
Fractile wise real growth rates of the Years to progress from one fractile to the next
grocery adjacent categories FY12-23E (ex-food and intoxicants)
Grocery (food) Grocery (non food) Grocery (non food) Discretionary categories
Grocery (cigarettes and alcohol) Discretionary categories
12
20% 10
10
15%
8
10%
5
6
5% 44
4 3 3 33
0% 2 22 2 22 22 22
2 11
2 1
-5%
20-30%ile
30-40%ile
40-50%ile
80-90%ile
90-95%ile
95-100%ile
0
5-10%ile
0-5%ile
10-20%ile
50-60%ile
60-70%ile
70-80%ile
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th
to to to to to to to to to to to
2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th

Sizing the quick commerce market opportunity in FY33E

We estimate the quick commerce market at INR 2.9tn in FY33E at a FY23-FY33E CAGR of 29.0%YoY
Quick Spend per Number of People Persons Total spending per Total spending per
Fractile
commerce person hhs ('000) per hh (in'000s) month (in INR bn) annum (in INR bn)
FY23
95-100%ile 4.4% 351 9,123 2.8 25,807 9 109
90-95%ile 2.0% 106 8,661 3.0 25,815 3 33
80-90%ile 0.5% 22 16,516 3.1 51,616 1 14
FY24E
95-100%ile 8.0% 670 9,242 2.8 26,142 18 210
90-95%ile 3.0% 168 8,774 3.0 26,150 4 53
80-90%ile 0.8% 38 16,731 3.1 52,287 2 24
FY33E
95-100%ile 35.0% 4,932 11,746 2.5 29,365 145 1,738
90-95%ile 20.0% 1,763 10,491 2.8 29,374 52 621
80-90%ile 10.0% 757 19,578 3.0 58,733 44 534
Total market size 41,814 1,17,471 241 2,893
Source: ISec research
How will the market evolve?

Market share by fractile evolution (industry) MTU share by fractile evolution (industry)
95-100%ile 90-95%ile 80-90%ile

18.4%
25
8.3%
18.4% 20
9.8
FY33E 15
21.5% 60.1% 10 6.3

73.3% 3.0
5 2.0
7.6
4.5
95-100%ile 90-95%ile 80-90%ile 0
FY24E FY33E
Source: ISec research Source: ISec research
AOV evolution FY24E-FY33E

Output
Blinkit KPI evolution and revenue trajectory.
Blinkit KPI evolution Blinkit revenue trajectory
MTU Order freq (per month) CAGR(24E-33E)
14 31.50%
12.1 mn 31%
12 31.00%
10 8.4 30.50%
8 30.00%
6 4.5 mn 29.50%
3.6 29%
4 29.00%
2 28.50%
0
28.00%
FY24E FY33E
GOV Revenue
Blinkit dark store additions
Net dark store addition Dark stores at the end of the year
2500
2,240
2000
1500
1000
480
500 250 250 250
150 180 200 230
110 120 130
0
Where will EBITDA margin stabilise?

We believe EBITDA margin for Blinkit should stabilise at around 4.8% of GOV.
Below is our estimate of Blinkit margin profile.
Scale benefits to drive EBITDA profile beyond FY28E
Take rate
Contribution as a % of GOV
Corporate overheads as a proportion of GOV
25.0% Adjusted EBITDA as a % of GOV
20.0%
15.0%
10.0%
5.0%
4.0% 4.2% 4.3% 4.5% 4.6% 4.8%

0.0% 3.2% 3.7%
1.6%
-5.0%
-3.3%

We note a higher headroom for take rate improvement in this business given two
drivers that is 1) ad-revenue growth and 2) mix improvement, which has been called
out by the company as well.
Ad revenues on Blinkit Ad revenues by top 20 advertisers on Blinkit
Q3FY23 Q3FY24 Q3FY23 Q3FY24
3.2X 2.1X
X
X
Source: Company data Source: Company data
Mix of higher ASP categories increasing: According to management, uptick in AOV

was also driven by the improving assortment and GOV mix in favour of high ASP
(average selling price) categories such as electronics, toys, books, beauty products,
home décor, festive needs, among others. While ordering frequency of these categories
is lower, their ASP tends to be 3-4x higher than other categories, thereby driving up
AOV.

Can competition pose a significant threat to the business

models?
We do not think there is a likelihood of a new entrant disrupting Zomato’s business
model significantly in either food delivery or quick commerce. Food delivery is now
reasonably established as a ‘duopoly of scale’. There have been multiple attempts to
disrupt the food delivery business both from local players as well as global tech giants,
however no one could scale meaningfully.
A case could be made for a new entrant into quick commerce, given the localised
nature of the business and the relative success of ‘Zepto’. However, ‘Zepto’ was
uniquely focussed on this opportunity and had the agility to dynamically alter their
business model to find a PMF (they pioneered 10 min deliveries). We think this maybe
difficult for large companies with sizeable other business interests to achieve as
evidenced by multiple exits from the space. Below is a brief history of challengers in
the food delivery and quick commerce space:
Landscape across food delivery and quick commerce

Past and current companies in food delivery and quick commerce
Food Delivery
Major incumbent players Year founded Year of exit
Swiggy 2014 NA
Zomato 2008 NA
Players which have exited Year founded Year of exit

Uber Eats 2014 2020 (sold to Zomato)
Amazon Food 2020 2022
Sold to Ola in 2017 and
Food Panda 2012
eventually shut down in 2019
Ola Café 2015 2016
Quick Commerce
Major incumbent players Year founded Year of exit
2013 (founded as Grofers,
Blinkit NA
sold to Zomato in 2022)
Instamart 2020 NA
Zepto 2021 NA
BB Now 2021 NA
Players which have exited Year founded Year of exit

JioMart Express 2022 2023
Dunzo 2015 NA
Ola Dash 2021 2022

What is the investment thesis behind ‘Hyperpure’ and

‘Going out’?
While the Hyperpure business has scaled rapidly and shown consistent profitability
improvement, it is unlikely to be comparable to the food delivery or the quick commerce
businesses in the foreseeable future either in terms of scale or profitability.
However, our channel checks suggest that Hyperpure is actually a strategic initiative
which is helping Zomato deepen their relationship with restaurants. These services are
specially appreciated by restaurants who compete with the large QSR chains (pizza,
burger etc). It ensures that they get access to standardised quality ingredients at a
reasonable price.
Hyperpure revenue (INR bn) Hyperpure YoY revenue growth (%)
10 200.0%
8.59
163%
7.45 152%
8
150.0% 129%
6.17 123%
6 104%
4.78
4.21 100.0%
4
50.0%
2
0 0.0%
Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24
Source: I-Sec research, Company data Source: I-Sec research, Company data
Hyperpure adj. EBITDA (INR bn) Hyperpure adj. EBITDA as a % of revenue
0.0% 0.0%
-10.0% -2.0%
-4.0%
-20.0%
-4.0%
-6.0% -4.6%
-30.0% -5.7%
-8.0%
-40.0% -0.35 -0.34 -0.34
-10.0%
-9.4%
-50.0% -0.45 -12.0%
-60.0% -0.53 -14.0% -12.6%
The ‘going out’ business is being developed to create a more holistic offering to ‘dining
out’ clients. This is a strategic investment to increase wallet share from existing
customers. However, scalability is likely to take time in our view.
Going out - GOV (INR mn) Going out – adj. EBITDA (INR mn)
10000 40 30
8580
20 10 10
8000 6820
6160 0
6000
-20
4000 3380 3480 -20
-40
2000 -60
0 -80 -70

Are the ‘rich valuations’ justified?

Our 3 stage DCF
DCF calculation
WACC 12.0%
Terminal growth 5%
NPV of Cash flows (FY25-FY43) 10,53,686

Terminal Value 13,62,886
Enterprise value core business 24,16,572

Cash (Mar 25) 1,55,000
Total 25,71,572
Shares 8,570
Value per share (INR) 300
SOTP
EV/EBITDA EV/EBITDA INR per
SOTP EV (INR bn) EV (USD bn) Proportion
FY26 FY27 share
Food
1,599 19.2 60 49 62.2% 187
delivery
Blinkit 654 7.9 85 58 25.4% 76
Hyperpure 99 1.2 130 50 3.8% 12
Others 64 0.8 99 74 2.5% 7
Cash 155 1.9 6.0% 18
Overall 2,572 30.9 72 55 100.0% 300
Peer comparison
Revenue Revenue growth EV/Revenue EBITDA EBITDA growth EV/EBITDA
Company (in USD mn)
(CY26) (CY24-26) (CY26) (CY26) (CY24-26) (CY26)
Zomato Ltd. USD3,032 27% 6.0 USD486 76% 37.3
DoorDash Inc USD13,508 15% 3.8 USD2,955 31% 17.6
Meituan Dianping USD61,966 17% 1.0 USD10,304 41% 5.9
Grab Holdings Limited USD5,476 14% 1.5 USD790 94% 10.3
Restaurant Brands Asia Ltd. USD498 20% 1.5 USD55 29% 13.9
Jubilant FoodWorks USD992 16% 3.6 USD238 21% 15.0
Domino's Pizza, Inc. USD5,429 6% 3.8 USD1,140 8% 18.3
Deliveroo Holdings Plc USD3,260 10% 0.5 USD329 44% 5.2
Source: Visible Alpha ,I-Sec research
Competitor valuation
Competitor valuation
40 Zomato
35
30
EV/EBITDA (CY26)
DoorDash
25
Domino's
20
15 RBA Grab
10 Jubilant
Deliveroo
Foodworks
5
Meituan
0
0% 20% 40% 60% 80% 100%
EBITDA growth (%)

Zomato vs DoorDash share price performance
Zomato DoorDash
180 145
170 135
160 125
Door Dash USD

150
115
Zomato INR
140
105
130
95
120
110 85
100 75
90 65
01-10-23 01-11-23 01-12-23 01-01-24 01-02-24 01-03-24

Our numbers - Medium term outlook

Adjusted revenue growth
Adjusted revenue growth FY24 FY25 FY26 FY27
Food delivery 25.8% 29.1% 30.0% 22.0%
Quick commerce 111.6% 60.7% 35.8% 28.3%
Hyperpure 107.4% 44.9% 28.5% 28.5%
Others 10.0% 25.0% 25.0% 25.0%
Total 49.4% 38.0% 30.7% 24.9%
Adjusted EBITDA margin (as a proportion of adj. revenue)

Adjusted EBITDA margin (as a proportion of adj revenue) FY24 FY25 FY26 FY27
Food delivery 10.6% 16.8% 20.5% 20.8%
Quick commerce -18.0% 8.1% 15.7% 18.0%
Hyperpure -2.9% -0.2% 1.5% 2.7%
Others 14.1% 15.0% 16.0% 17.0%
Total 2.7% 10.9% 14.9% 15.6%
I-Sec vs Consensus
(INR mn) FY24E FY25E FY26E
Consensus I-Sec Diff. (%) Consensus I-Sec Diff. (%) Consensus I-Sec Diff. (%)
Revenue 1,21,173 1,31,337 8.4 1,68,848 1,77,424 5.1 2,15,271 2,21,249 2.8
Adj. EBITDA 3,757 3,625 -3.5 16,197 20,138 24.3 29,699 35,878 20.8
PAT 3,102 2,094 -32.5 14,300 13,923 -2.6 27,213 28,023 3.0
Source: Visible Alpha, I-Sec research

Risk Reward Skew (3.9:1) to the upside

Bull case (INR 350): The bull case prices in 30% YoY GOV growth in food delivery
FY25E and adj. EBITDA (% of GOV) improvement of 350bps in FY25E over FY24E. This
case also prices in adj. EBITDA profitability in quick commerce achievement in
Q4FY24E and sustained improvement thereafter. Resultant overall revenue growth of
48% YoY in FY25E with an adj. EBITDA margin (% of reported revenue) of 13.5% in
FY25E. In this case we think the stock could trade at INR350, implying a 1 year forward
EV/EBITDA multiple of 78x.
Base case (INR 300): The base case prices in 23.3% YoY GOV growth in food delivery
in FY25E and adj. EBITDA (% of GOV) improvement of 170bpsYoY in FY25E over
FY24E. This case also prices in adj. EBITDA profitability in quick commerce
achievement in Q1FY25E. Resultant overall revenue growth of 38% YoY in FY25E with
an adj. EBITDA margin (% of reported revenue) of 10.9% in FY25E. In this case we value
the stock at a PT of INR300, implying a 1 year forward EV/EBITDA multiple of 72x.
Bear case (INR 128): The bear case prices in 10% YoY GOV growth in food delivery
FY24E and adj. EBITDA (% of GOV) decline of 130bps in FY25E over FY24. This case
also prices in adj. EBITDA profitability in quick commerce achievement beyond
Q3FY25E. Resultant overall revenue growth of 25% YoY in FY25E with an adj. EBITDA
margin (% of reported revenue) of 1.5% in FY25E. This scenario also prices in sub-
optimal capital allocation into acquisitions. In this case we think the stock could trade
at INR 128, implying a 1yr forward EV/EBITDA multiple of 54x.
Risk reward skew (3.9:1)
ZOMATO upside downside price chart (INR) Upside : Downside

400 3.9:1
350 350
300
250 300
200
173
150
100 128
50
0
Jul-21
Jan-22
May-22
Jan-23
May-23
Jan-24
May-24
Jan-25
Jul-22
Jul-23
Jul-24
Nov-24
Nov-21
Nov-22
Nov-23
Sep-21
Mar-23
Mar-22
Sep-22
Sep-23
Mar-24
Sep-24
Downside Normal Upside

DCF calculations - Bull case

DCF assumptions
WACC 11.5%
Terminal growth 5%


Cash (Mar 25) 1,65,000
Total 30,02,035
Shares 8,570
SOTP - Bull case

FY26 FY27 share
Food
1,846 22.2 65 53 61.5% 215
delivery
Blinkit 754 9.1 90 62 25.1% 88
Hyperpure 122 1.5 160 61 4.1% 14
Others 116 1.4 178 134 3.9% 14
Cash 165 2.0 5.5% 19
Overall 3,002 36.1 78 60 100.0% 350
DCF - Bear case

DCF calculations
WACC 13.5%
Terminal growth 5%


Cash (Mar 25) 1,00,000
Total 11,01,123
Shares 8,570
SOTP - Bear case

FY26 FY27 share
Food delivery 514 6.2 60 46 46.7% 60
Blinkit 357 4.3 80 49 32.4% 42
Hyperpure 76 0.9 100 38 6.9% 9
Others 55 0.7 84 63 5.0% 6
Cash 100 1.2 9.1% 12
Overall 1,101 13.2 79 54 100.0% 128

Shareholding pattern Price chart

% Jun‘23 Sep‘23 Dec‘23 200
Promoters 0.0 0.0 0.0 150
Institutional investors 64.4 67.8 70.4
MFs and others 8.3 10.6 12.3 100
FIs/Banks 0.1 0.0 0.0
(INR)
50
Insurance 0.8 1.5 2.1
FIIs 34.1 33.7 34.4 0
FDI 21.1 22.0 21.6
Mar-22
Nov-22
Mar-24
Feb-23
May-23
Jul-21
Jul-23
Jun-22
Sep-22
Dec-23
Oct-21
Jan-22
Oct-23
Others 35.6 32.2 29.6
Source: Bloomberg Source: Bloomberg

Financial Summary
Profit & Loss Cashflow statement
(INR mn, year ending March) (INR mn, year ending March)
FY23A FY24E FY25E FY26E FY23A FY24E FY25E FY26E

Net Sales 70,794 1,31,337 1,77,424 2,21,249 Operating Cashflow (8,440) 9,567 17,088 23,357
Operating Expenses 68,945 1,02,725 1,20,042 1,33,816 Working Capital Changes (1,759) 5,941 1,591 (3,180)
EBITDA (7,045) 3,625 20,138 35,878 Capital Commitments (1,014) (1,839) (2,484) (3,097)
EBITDA Margin (%) (10.0) 2.8 11.4 16.2 Free Cashflow (9,454) 7,728 14,604 -
Depreciation & Amortization 4,369 4,991 5,323 5,531 Other investing cashflow 6,694 7,440 7,960 8,123
EBIT (16,472) (2,523) 8,690 30,347 Cashflow from Investing
5,680 5,601 5,476 5,026
Interest expenditure 487 657 887 1,106 Activities
Other Non-operating Issue of Share Capital 40 - - -
6,815 7,440 7,960 8,123
Income Interest Cost - - - -
Recurring PBT (10,144) 4,260 15,762 37,364 Inc (Dec) in Borrowings - - - -
Profit / (Loss) from Dividend paid - - - -
- - - -
Associates Others (1,314) (657) (887) (1,106)
Less: Taxes (436) - 4,641 9,341 Cash flow from Financing
(1,274) (657) (887) (1,106)
PAT (9,708) 2,094 13,923 28,023 Activities
Less: Minority Interest (6) - - - Chg. in Cash & Bank
(4,034) 14,511 21,677 27,277
Extraordinaries (Net) - - - - balance
Net Income (Reported) (9,714) 2,094 13,923 28,023 Closing cash & balance 3,288 16,693 38,369 65,646
Net Income (Adjusted) (9,720) 2,094 13,923 28,023
Source Company data, I-Sec research
Key ratios
Balance sheet (Year ending March)
(INR mn, year ending March)
FY23A FY24E FY25E FY26E
FY23A FY24E FY25E FY26E Per Share Data (INR)
Total Current Assets 18,452 35,474 60,939 94,848 Reported EPS (1.2) 0.2 1.6 3.3
of which cash & cash eqv. 10,168 24,679 46,356 73,632 Adjusted EPS (Diluted) (1.2) 0.2 1.6 3.3
Total Current Liabilities & Cash EPS (0.7) 0.8 2.3 4.0
12,910 24,326 31,776 38,860
Provisions Dividend per share (DPS) - - - -
Net Current Assets 5,542 11,148 29,163 55,989 Book Value per share (BV) 24.0 23.3 24.9 28.2
Investments 46,952 50,083 53,416 58,248 Dividend Payout (%) - - - -
Net Fixed Assets - - - -
ROU Assets - - - - Growth (%)
Capital Work-in-Progress - - - - Net Sales 68.9 85.5 35.1 24.7
Total Intangible Assets - - - - EBITDA (27.6) (151.5) 455.5 78.2
Other assets 1,50,583 1,47,431 1,44,592 1,42,158 EPS (INR) - - 564.9 101.3
Deferred Tax Assets - - - -
Total Assets 2,03,077 2,08,662 2,27,172 2,56,395 Valuation Ratios (x)
Liabilities P/E (145.2) 703.0 105.7 52.5
Borrowings 404 404 404 404 P/CEPS (263.5) 207.8 76.5 43.9
Deferred Tax Liability - - - - P/BV 7.2 7.5 7.0 6.2
provisions 936 1,799 2,430 3,031 EV / EBITDA (192.1) 385.5 68.2 37.4
other Liabilities 2,543 1,847 2,478 3,079 P / Sales 19.9 11.2 8.3 6.7
Equity Share Capital 1,94,598 1,96,692 2,10,615 2,38,638 Dividend Yield (%) - - - -
Reserves & Surplus - - - -
Total Net Worth 1,94,598 1,96,692 2,10,615 2,38,638 Operating Ratios
Minority Interest (66) 3,258 6,582 6,582 Gross Profit Margins (%) 80.3 78.4 77.1 76.7
Total Liabilities 2,03,077 2,08,662 2,27,172 2,56,395 EBITDA Margins (%) (10.0) 2.8 11.4 16.2
Source Company data, I-Sec research Effective Tax Rate (%) 4.3 - 29.4 25.0
Net Profit Margins (%) (13.7) 1.6 7.8 12.7
Quarterly trend NWC / Total Assets (%) - - - -
(INR mn, year ending March) Net Debt / Equity (x) 1.0 1.0 1.0 1.0
Net Debt / EBITDA (x) 8.1 (20.5) (4.9) (3.7)
Mar-23 Jun-23 Sep-23 Dec-23
Net Sales 20,560 24,160 28,480 32,880 Profitability Ratios
% growth (YOY) 69.7% 70.9% 71.4% 68.8 RoCE (%) (8.6) (2.3) 4.0 9.5
EBITDA (2,254) (480) (470) 510 RoE (%) (5.4) 1.1 6.7 12.1
Margin % (11.0%) (2.0) (1.7) 1.6 RoIC (%) (5.1) 2.5 5.6 12.5
Other Income 1,705 1,810 2,120 2,190 Fixed Asset Turnover (x) 1.1 0.6 0.4 0.3
Adjusted Net Profit (2,044) 20 360 1380 Inventory Turnover Days 4 11 15 20
Source Company data, I-Sec research Receivables Days 24 20 20 25
Payables Days 35 38 38 38

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BUY (Maintained) 

25 March 2024 India | Equity Research | Company Update

Please refer to important disclosures at the end of this report

Can competition pose a significant threat to the business models?

What is the investment thesis behind ‘Hyperpure’ and ‘Going out’?

Are the ‘rich valuations’ justified?

Upcoming triggers for the stock

Risk-reward skew (3.9:1) to the upside

India | Equity Research 2

Source: I-Sec research

India | Equity Research 3

Source: I-Sec research Source: I-Sec research

Sizing the food delivery market opportunity in FY33E

How will the market evolve?

Source: ISec research Source: ISec research

India | Equity Research 4

AOV evolution FY24E-FY33E

Source: I-Sec research

MTU Ordering frequency (per month) FY24E-33E

50 46.7 mn 22.4% 22.3%

Source: I-Sec research Source: I-Sec research

India | Equity Research 5

Where will EBITDA margin stabilise?

Take rate (%) Contribution as a % of GOV

Source: I-Sec research

Median commission structure Some signs of standardisation evident

25.0% Sep'23 Mar'24

5.0% 15.0% 10.5%

Source: I-Sec research Source: I-Sec research

India | Equity Research 6

More restaurants advertising now Positive experience from advertising

17.9% 9.3% 8.5%

Source: I-Sec research Source: I-Sec research

India | Equity Research 7

Grocery (food) Grocery (non food)

Source: I-Sec research

Source: I-Sec research Source: I-Sec research

India | Equity Research 8

Sizing the quick commerce market opportunity in FY33E

How will the market evolve?

95-100%ile 90-95%ile 80-90%ile

21.5% 60.1% 10 6.3

Source: ISec research Source: ISec research

AOV evolution FY24E-FY33E

Source: I-Sec research

India | Equity Research 9

Blinkit KPI evolution Blinkit revenue trajectory

MTU Order freq (per month) CAGR(24E-33E)

Source: I-Sec research Source: I-Sec research

Blinkit dark store additions

Source: I-Sec research

Where will EBITDA margin stabilise?

4.0% 4.2% 4.3% 4.5% 4.6% 4.8%

Source: I-Sec research

India | Equity Research 10

Ad revenues on Blinkit Ad revenues by top 20 advertisers on Blinkit

Q3FY23 Q3FY24 Q3FY23 Q3FY24

Source: Company data Source: Company data

Mix of higher ASP categories increasing: According to management, uptick in AOV