Why investors are putting buy orders on Zomato

Foodtech venture Zomato, which is known for its food ordering service but is also building its presence in quick commerce and B2B supplies, saw its share price rocket 10% on Friday morning.

The company’s share price had doubled soon after it went public last year but then saw the euphoria die down as globally tech stocks witnessed a sharp correction this year. The company is still trading at less than half the value it had attained a year back.

Now, after posting strong quarterly results that show high revenue growth and reduced losses, the stock is looking to clock gains in the future.

Here are some notes from its latest financial results that are noteworthy.

First things first, Zomato hit an annual revenue rate of $1 billion, or about Rs 8,000 crore, last quarter with the revenues for the three months ended September 30 rising to Rs 2,107 crore. Although this included revenues from quick commerce venture Blinkit that it acquired last quarter, even excluding it, the company’s revenue rose 38% year on year.

While high growth in the food delivery business is tapering off, it is more than made up from B2B supplies business which has tripled in size over the year ago period.

The company said its adjusted EBITDA from the food delivery business has now moved into the black. On the flip side, as it accounted for rental lease expense as part of IND-AS reporting, its B2B supplies business has once again seen some impact with adjusted EBITDA loss rising after staying static for two straight sequential quarters.

Total adjusted EBITDA loss reduced to Rs 192 crore as compared to Rs 310 crore in Q2 FY22. Adjusted EBITDA loss (excluding-quick commerce) was Rs 60 crore for the quarter compared to Rs 150 crore in the previous quarter i.e., Q1 FY23.