Zomato extends gains after posting profit in Q1, shares cross Rs 100

Zomato, a company which was making losses since its listing on the bourses, posted a net profit of Rs 2 crore for the first time in the April-to-June quarter.

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Zomato shares crossed the Rs 100 mark in early trade after rallying for the last five consecutive sessions on the National Stock Exchange.

Zomato shares are up 5.87 percent at Rs 101 at 12.24 pm on the NSE.

Zomato, a company that was making losses since its listing on the bourses, posted a net profit of Rs 2 crore for the first time in the April-to-June quarter. The company announced its results for Q1FY24 on August 3. A day after, Zomato shares were up 10 percent, and around 42 crore shares changed hands on the exchanges, which was 14 times more than Zomato’s monthly traded average.

Zomato’s profit came on the back of the ‘deferred tax’ provision. Essentially Zomato has been running at a loss for a while, so it is allowed to offset that loss against a profit for future periods, according to Indian tax laws.

Zomato’s financial filings indicate an initial pre-tax loss of Rs 15 crore. Subsequently, a tax provision adjustment led to the inclusion of Rs 17 crore in ‘deferred tax’ within the preceding category. As a result, the financial statement reflected a post-tax profit (PAT) of Rs 2 crore.

Also read Devil in the details: How Zomato didn’t turn in a profit before tax, but a profit after tax

Gross Order Value for food delivery grew 14 percent year-on-year and 11 percent sequentially in the April-to-June quarter. Gross Order Value is the total amount charged which has food cost and the delivery fee. JM Financial in a report dated August 3 said the growth in Gross Order Value was due to demand recovery, adoption of ‘Zomato Gold’, and better supply-side execution. Sales through Zomato Gold contributed 30 percent to the total Gross Order Value.

The Blinkit business reduced losses by Rs 70 crore in Q1FY24. Blinkit’s Gross Order Value increased 4.6 percent year-on-year in the same period. However, the number of orders declined, which was due to temporary business disruption in April-to-May as the delivery partner pay structure was revised along with hyperlocal challenges pertaining to heavy rainfall, said ICICI Securities in a report dated August 4. ICICI Securities expects Blinkit to turn profitable by FY25.

Also read As Zomato turns profitable, brokerages rush to raise their target prices

Hyperpure revenue grew 126 percent year-on-year and 29 percent sequentially in Q1FY24. “Growth in Hyperpure was driven by increase in supplies to restaurants as well as higher supplies to Blinkit,” said JM Financial.

Hyperpure’s margins improved as minimum order value was increased which led to the churn of few unprofitable restaurants, and higher Average Order Value. ​