F24028 Zomato Cashflow

About the Company
Zomato Limited primarily operates as an online food delivery company in India and
internationally. It operates through India Food Ordering and Delivery; Hyperpure
Supplies; Quick Commerce; Going Out, and All Other segments. The company
operates operates a B2C technology platform under Zomato brand name, that helps
to search and discover restaurants, order food delivery, read and write customer
generated reviews, view and upload photos, and book a table and make payments
while dining-out at restaurants, as well as discovery and ticketing services primarily
for events, such as food carnivals, music concerts, comedy shows, and others. Its
technology platform connects customers, restaurant partners, and delivery
partners.
The company also operates Hyperpure, a procurement solution that supplies
ingredients and kitchen products to restaurant partners; and Blinkit, a quick
commerce marketplace delivering everyday products to customers within minutes.
In addition, it engages in the provision of event organizing, and payment aggregator
and gateway services; and engages in the trading, financing, and investment
activities. The company was incorporated in 2010 and is headquartered in
Gurugram, India.
An overview on tools used for
Financial Analysis
Ratio Analysis: This involves calculating and interpreting financial

ratios to assess a company's performance and financial health.
Trend Analysis: This looks at financial data over time to identify
patterns or trends in a company's performance.
Horizontal Analysis: This compares financial data over several
periods to see how individual line items change over time, usually
expressed as percentages.
Vertical Analysis: This expresses each line item on a financial
statement as a percentage of a base figure, allowing for easy
comparison between companies of different sizes.
Cash Flow Statement: This shows how changes in balance sheet
accounts and income affect cash and cash equivalents, breaking the
analysis down into operating, investing, and financing activities.
Fund Flow Statement: This report shows the movement of funds into
and out of a company, highlighting the sources and uses of a
company's financial resources.
Introduction to Cash Flow Analysis
The cash flow analysis refers to the examination or analysis of the

different inflows of the cash to the company and the outflow of the cash
from the company during the period under consideration from the
different activities, which include operating activities, investing
activities, and financing activities.
Cash flow from Operations

Cash flow from the operation means accounting for cash inflows generated
from the normal business operations and their corresponding cash
outflows.
There are two ways to calculate cash flow from operations – 1) the Direct
and 2) the Indirect method.
The indirect method is used in most cases.
Cash Flow from Investment Activities

Other than operations, the company also invests in assets that can provide
them with greater returns. Cash Inflow from investing activities would
include purchasing long-term assets or securities or selling them (except
cash) and providing and taking loans. We need to find out how many
cashless (loss or gain) activities are done during the period so we can take
them into account while ascertaining the net cash inflow.
Cash Flow from Financing Activities
First, if there is any buying back or issuing stocks, it will come under
financing activities in cash flow analysis.
Borrowing and repaying loans on a short term or long term issuing
notes and bonds, etc.) will also be included under financing activities.
We also need to include dividends paid (if any). However, we need to
ensure that we don’t include accounts payable or accrued liabilities
(because they would be taken into account in net cash flow from
operating activities).
Methods of Reporting Cashflow Statement
Direct method
IAS 7 encourages entities to report cash flows from operating activities
using the direct method. Under this method, data on major classes of gross
cash receipts and gross cash payments can be derived in one of two ways
(IAS 7.19):
Directly from the entity’s financial software; or
By adjusting sales, cost of sales, and other P/L items for working capital
movements, non-cash charges, and items where the cash effects are
related to investing or financing activities.
Indirect method
Under the indirect method, net cash flow from operating activities is
calculated by adjusting profit or loss for the following:
Changes in working capital;
Non-cash charges in profit or loss, such as depreciation; and
Items where the cash effects relate to investing or financing activities.
IAS 7.20 stipulates the use of profit or loss as a starting point when
reporting cash flows from operating activities using the indirect method.
Nonetheless, several reporting entities use subtotals like operating profit,
which don’t equate to ‘profit or loss’ as they exclude certain items of
income and expense. However, the upcoming IFRS 18 will change the
existing requirements so that entities will be required to use operating
profit or loss as the starting point for the indirect method.
ANALYSIS OF CASH FLOW STATEMENT
Operating Cash Flow:

There's a clear positive trend from 2022
to 2024.
The company moved from a negative
operating cash flow in 2022 to a positive
one in 2023, with further improvement in
2024.
This suggests improving operational
efficiency and profitability over time.
Investing Cash Flow:

There's a large negative investing
cash flow in 2022, indicating
significant capital expenditures or
acquisitions.
The investing cash flow becomes
less negative in 2023 and
approaches zero in 2024.
This trend might suggest the
company has completed a major
investment phase and is now
focusing on utilizing those
investments.
Financing Cash Flow:

There's a dramatic spike in financing
cash inflow around 2022-2023.
This could indicate a major financing
event, such as issuing new shares or
taking on significant debt.
After the spike, financing cash flows
return to near zero, suggesting the
company is not heavily relying on
external financing in recent periods.
Interpretation and Implication
1. Net Increase in Cash and Cash Equivalents:
Interpretation: The company’s cash position improved from INR -172 million in 2023 to
INR 58 million in 2024. This indicates effective cash generation despite substantial
investments and financing decisions.
Managerial Implication: The increased cash reserves signal financial stability.
Management should maintain or grow this buffer to handle financial challenges and
seize strategic opportunities. Excess cash can be invested or used for debt reduction.
2. Cash Flow Forecasting:
Interpretation: Fluctuations in cash flow patterns indicate a transition toward growth
investments.
Managerial Implication: Management should create detailed forecasts to anticipate
future cash needs, ensuring liquidity for essential operations and strategic initiatives.
3. Operational Efficiency and Cash Flow Health:
Interpretation: The rise in operational cash flows in 2024 reflects improved efficiency
and sustainable operations.
Managerial Implication: Continued focus on operational efficiency, cost reduction, and
optimized working capital will free up more cash for reinvestment or shareholder
returns.
4. Balancing Growth Investments and Liquidity:
Interpretation: Heavy investments in mutual funds and securities were balanced by
liquidity from redeemed investments, but net cash outflow signals a focus on future
returns.
Managerial Implication: Management must balance long-term investments with
maintaining liquidity to avoid cash constraints. Clear policies on investment risks and
returns are crucial.
5. Debt Management and Financial Flexibility:
Interpretation: Low debt levels show a cautious approach, but this may limit growth
opportunities.
Managerial Implication: The company could consider low-cost debt to finance
expansion without straining cash flows, while keeping debt manageable for financial
flexibility.
6. Impact of Exchange Rate Movements:
Interpretation: Minimal foreign exchange differences suggest some exposure to
currency fluctuations.
Managerial Implication: As international investments grow, management should
develop strategies to hedge against foreign exchange risks to protect cash flows from
volatility.
Conclusion
The company has improved its cash flow management, showing stronger operational
efficiency and liquidity. Management should balance growth-oriented investments with
maintaining liquidity, leveraging detailed cash flow forecasting, and risk management for long-
term financial resilience and growth.

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About the Company

Ratio Analysis: This involves calculating and interpreting financial

The cash flow analysis refers to the examination or analysis of the

Cash flow from Operations

Cash Flow from Investment Activities

Operating Cash Flow:

Investing Cash Flow:

Financing Cash Flow:

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