Zomato's stock showed a two-day recovery on January 23, following a steep decline of over 17% after the company announced its Q3 FY25 results on January 20. Below are the key details of the stock’s performance and market reaction:
Stock Performance
- Two-Day Recovery: Zomato shares gained 2% to trade at ₹221.1 as of 11:05 am on January 23.
- Earlier Decline: The stock had dropped significantly after Q3 results were announced, driven by concerns over rising costs.
Q3 FY25 Financial Highlights
1. Revenue Impact:
- Despite steady topline growth, increased investments in Blinkit's operations affected overall margins and profitability.
2. Net Profit Decline:
- Consolidated net profit fell of Zomato by 57% year-on-year (YoY) from ₹138 crore in the same quarter last year to ₹59 crore in Q3 FY25.
- This decline was attributed to increased spending to support Blinkit, Zomato's quick commerce segment.
Operational Challenges
- Blinkit Expansion:
- The aggressive scaling of Blinkit, including the addition of new dark stores, inflated expenses.
- The quick commerce arm has seen faster-than-expected growth but at the cost of short-term profitability.
- Market Competition:
- Rising competition in the quick commerce space has increased spending requirements to maintain market share.
Strategic Focus
- Zomato has prioritised long-term growth by expanding its dark store network for Blinkit.
- The company aims to leverage its strong execution capabilities and solid balance sheet to secure a leading position in the quick commerce segment.
Market Context
- The recent stock correction reflects investor concerns over the quick commerce industry's heightened competition and margin pressures.
Summary
Zomato's Q3 performance highlights the company's strategic efforts to scale Blinkit while managing the associated financial impact. Although its profitability has taken a hit in the short term, its focus on expansion and execution underscores its long-term growth ambitions.
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