Can Zomato bounce back after a 30% stock plunge?

‘Blink and You’ll Miss It’

The growth in Blinkit’s numbers is undeniable.

GOV leaped from ₹12,469 crore in FY24 to ₹18,853 crore in just the first nine months of FY25.

By the end of FY25, Blinkit is projected to close the year at nearly ₹26,000 crore in GOV — a remarkable 124% annual growth rate. This trajectory has been powered by an aggressive expansion of dark stores, which serve as the backbone of its operations.

As of Q3FY25, Blinkit had 1,007 dark stores, and the company has already revised its target of reaching 2,000 stores by December 2025 — a full year ahead of earlier guidance.

Source: Zomato’s Q3FY25 Report

Profit or Loss?

What makes Q-commerce so compelling is its ability to address pain points that traditional grocery delivery could not.

Blinkit has leveraged centralised dark stores, streamlining sourcing and reducing delivery times. This strategy, combined with India’s cost-effective labour market, has enabled it to achieve delivery speeds that were previously unheard of.

Customers not only value speed but are also starting to view Blinkit as a reliable platform for everyday essentials, reinforcing a habit that could drive future growth.

However, it’s not all smooth sailing.

While Blinkit is growing exponentially, profitability remains elusive. Contribution margins have turned positive, meaning the business is covering its variable costs, but adjusted EBITDA remains in the red.

In Q3FY25, the adjusted EBITDA margin stood at -1.3% of GOV, a fall from earlier quarters due to the addition of new stores. While 30% of Blinkit’s stores are already contribution-margin positive and contribute over 50% of GOV, the newer stores are dragging down overall profitability.

Source: Source: Zomato’s Q3FY25 Report

The nuances of Blinkit’s store cohort analysis reveal an interesting pattern.

Older stores are highly profitable, with the top 30% generating 52% of GOV and contribution margins ranging from 4.4% to 6.4%.

These stores have had time to mature, optimise operations, and build a loyal customer base. In contrast, the bottom 25% of stores, which are newer and less established, operate at negative margins of -8.5%. This disparity underscores the challenge of scaling Q-commerce while maintaining financial discipline.

Yet, it also hints at the potential for profitability if newer stores can replicate the performance of older cohorts.

Retention, attention, and store wars

The business’s user metrics further highlight its promise.

Blinkit’s GOV retention rate is an astonishing 144%, meaning that the same users are spending more over time. AOV has risen from ₹625 in Q1FY25 to ₹707 in Q3FY25, signaling that customers are not only ordering frequently but are also placing higher-value orders.

This behavioural shift suggests that Q-commerce is transitioning from a convenience-driven novelty to a deeply ingrained habit.

The competitive landscape, however, is heating up.

While Blinkit and Swiggy Instamart have dominated the market, players like Zepto, Flipkart, Amazon, and Reliance Retail are aggressively entering the fray.

Despite this, Blinkit has managed to outpace its competitors in terms of revenue growth. Its revenues are 2.5x those of Instamart, owing to faster dark store expansion and a more aggressive investment strategy.

But the market is not without limits. HDFC Securities estimates that India can accommodate 7,500 dark stores, and with the top players already operating close to 6,000, the window for new entrants is rapidly closing.

Blinking towards the finish line

While challenges remain, the road to profitability is not entirely out of reach.

If Blinkit’s existing trends hold — especially its high user retention, rising AOV, and the maturation of newer store cohorts — the business could achieve EBITDA profitability within six to eight quarters. This is a crucial milestone that would solidify Blinkit’s place as a key pillar of Zomato’s ecosystem.

What stands out most is how Blinkit has managed to foster habit formation among its users. With customers returning frequently and spending more, Q-commerce is no longer just a solution to a problem; it is becoming a way of life.

Building the next pillars of growth

Zomato’s ongoing diversification has extended its reach into two promising verticals — its Going-Out Business and B2B Supplies. While still in their early days, these segments hold unique potential to create complementary ecosystems around Zomato’s core food delivery platform.

A night out, reimagined: The going-out business

Launched in November 2024, the District app is Zomato’s bold attempt to consolidate India’s fragmented going-out market.

By integrating services like dining-out, event ticketing, and entertainment discovery under a single platform, Zomato hopes to redefine how Indians engage with nightlife and cultural events. Early signs are promising, with over 6.5 million downloads within weeks of launch.

This initiative, however, comes with significant challenges.

As Zomato transitions its going-out customers from platforms like Paytm, Insider, and TicketNew to District, the focus remains on seamless user migration and improved engagement.

The company aims to expand the platform’s selection, bringing world-class experiences to Indian audiences while ensuring smooth discovery through intuitive tech.

The financials tell a story of rapid growth paired with heavy investment.

In Q3FY25, the going-out vertical generated a GOV of ₹2,495 crore, marking a 191% YoY increase. Revenue for the segment jumped 255% YoY to ₹259 crore. However, adjusted EBITDA fell to ₹-17 crore for the quarter, driven by expenses related to District’s development, marketing, and team expansion.

While profitability is not expected in the near term, the core going-out business remains profitable outside of these investments. Zomato is betting that the enhanced customer experience on District will pay dividends over time, establishing it as a one-stop destination for all going-out activities in India.

Zomato’s Going-out, Hyperpure Business. (Source: Zomato’s Q3FY25 Report)

B2B Supplies: A quiet but steady growth engine

Zomato’s B2B Supplies business has a simpler narrative: it exists to support restaurants, primarily by providing essential goods and services.

As India’s restaurant landscape grows, this vertical naturally benefits from increased demand for kitchen supplies, raw materials, and operational tools.

Although it is unlikely to rival the scale of Zomato’s other businesses, B2B supplies play a vital role in strengthening the company’s relationship with restaurants. By streamlining procurement, Zomato helps its partners reduce costs, improve efficiency, and focus on delivering quality dining experiences.

This symbiotic relationship not only bolsters the restaurant ecosystem but also reinforces Zomato’s position as a key enabler in the food industry.

For now, the segment is expected to remain small but resilient. Its growth will mirror the rise of new restaurants, making it a complementary, if understated, part of Zomato’s overall strategy.

Should one invest in Zomato?

Zomato’s current market capitalization hovers around ₹2 lakh crore after a recent rerating over the past two weeks.

With a Price-to-Sales (P/S) ratio of approximately 9x based on trailing 12-month revenue, the stock is trading at a premium compared to global peers in the food and delivery space. This premium is largely driven by Zomato’s strong market share in food delivery (55%), its leadership in quick commerce through Blinkit, and its ability to sustain revenue growth even as competition intensifies.

For FY24, Zomato reported total revenue of ₹13,545 crore, representing a 56% YoY growth. Analysts project revenues to surpass ₹25,000 crore by FY26, driven by continued expansion in food delivery and quick commerce.

Assuming Zomato maintains its current valuation multiple, the market capitalization could see a potential upside of 50% from current levels, driven by its strong growth trajectory and expanding verticals.

However, profitability remains the key concern.

While the company’s adjusted EBITDA turned positive for its core food delivery business, the heavy investments in Blinkit and the District app have weighed on consolidated profitability.

Blinkit, for instance, is projected to achieve EBITDA profitability within the next six to eight quarters, with an expected revenue contribution of over ₹20,000 crore by FY30. Similarly, the going-out business is poised to grow at a 40%+ CAGR over the next few years, albeit with near-term losses as District scales.

With a strong balance sheet and no immediate need for additional capital, Zomato is well-positioned to fund these expansions. However, the transition from growth to profitability will require disciplined execution. Any misstep — whether in scaling new verticals or maintaining customer loyalty in food delivery — could weigh heavily on the stock’s valuation.

The final word

Zomato’s story is one of transformation and ambition.

It has successfully diversified its business while maintaining leadership in its core operations. The company’s focus on creating an integrated ecosystem, combined with its strong execution track record, makes it an exciting prospect for growth-oriented investors.

However, the stock’s premium valuation leaves little room for error.

While the long-term growth potential is evident, the journey to sustainable profitability and the ability to fend off intensifying competition will determine its ultimate success. Investors should weigh the growth opportunities against the execution risks and consider their own risk tolerance before making any decisions.

As Zomato navigates its next phase of growth, it remains a company to watch — both for its strategic moves and its ability to redefine India’s digital consumption landscape.

Note: We have relied on data from the annual reports throughout this article. For forecasting, we have used our assumptions.

Parth Parikh has over a decade of experience in finance and research, and he currently heads the growth and content vertical at Finsire. He has a keen interest in Indian and global stocks and holds an FRM Charter along with an MBA in Finance from Narsee Monjee Institute of Management Studies. Previously, he has held research positions at various companies.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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