Markets
Zomato: The Super Brand idea worked. What is next?
Summary
- As Zomato continues to outperform competitors like Swiggy, its innovative approach to business models and acquisitions is paying off. With substantial growth in gross order value and profits, the future looks bright.
SuperApps don’t seem to work in India that well. Deepinder Goyal, founder and CEO of Zomato, learned this early on in his career. While big conglomerates like Tata, Adani, and Reliance are struggling to generate profits from their SuperApps (Tata Neu, Adani One, and My Jio) despite having a vast customer base and pumping huge money, a new-age company has done it with a small set of targeted customers.
Zomato turned around the profit metrics of food deliveries and is now out to replicate the same for its other ventures. While Swiggy is still running at a loss of ₹2,350 crore in FY24, Zomato reported a full-year profit of ₹351 crore. Zomato beat Swiggy at its own game, despite entering the food delivery business later (2015) than Swiggy (2014).
Zomato stock price momentum
Profit is music to investors’ ears. The share market rewarded Zomato for the profits as its stock price soared 440% from ₹51 in April 2023, when the journey to profits began, to over ₹278 at present. During this time, its net profit soared 126.5x from its first profit of ₹2 crore in the June 2023 quarter to ₹253 crore in the June 2024 quarter. Within three years of its IPO, Zomato joined the ₹2 trillion market cap club.
Zomato found the road to sustainable and growing profits for five straight quarters. Other platform businesses that launched their IPOs alongside Zomato are still struggling to sustain profits or grow them. Nykaa was the first to turn profitable in 2021 but failed to grow its profits. Meanwhile, Paytm is struggling to lower its losses.
What did Zomato do differently?
Swiggy worked really hard to start the food delivery and quick commerce business from scratch. It had to bear the build-up cost. Zomato, on the other hand, worked smart by acquiring Uber Eats and Blinkit that had already done the groundwork and built a customer base.
Zomato started as a restaurant discovery and dining out business. With Zomato Gold, it began offering special discounts to its members. At that time, it was a good source to make the platform sticky and change the habits of consumers. It even extended the Zomato Gold benefits to its food delivery business (free delivery benefits), which is still affecting its margins.
Hence, it decided not to mix up rewards and keep everything separate. While Swiggy extended its loyalty programme “Swiggy One" to cover both food delivery and quick commerce, Zomato has made it clear that Gold will not be extended to Blinkit.
Zomato likes to keep things separate
Another thing Zomato is doing differently is building different apps for different services, and not cluttering all the offerings in one app, as in the case with super apps.
In a Superapp, you can buy insurance, shop for clothes, book tickets, and pay bills all on one app. The reward points you accumulate can be used across the host of offerings. The three conglomerates, Tata, Reliance, and Adani, are testing this model to keep customers within their respective conglomerate ecosystems. This model worked in China, where WeChat has more than 100 service offerings. However, it has so far failed to pick up in India.
Paytm also tried to take the Superapp route, looking to monetise the app traffic from payments customers. It even succeeded with Paytm Mall, small loans and FASTag offerings. This strategy worked for a while and even helped it generate profits. But disruption in one segment also affected the volumes of others.
Zomato took a different approach. Instead of clubbing all services in a single app, it kept Blinkit separate and cross-sold the service to Zomato customers. It has also launched a new app “District" for its Going Out business offering, which includes bookings for dining out, live events, and ticketing. Zomato calls it the Super Brand strategy, building multiple brands under its umbrella.
It is trying to replicate the food delivery economics in its remaining three offerings - Blinkit, District, and Hyperpure. If a particular offering doesn’t work, it can pull the app out of the market without affecting its successful ventures, as it did with its quick parcel delivery service offering “Xtreme". Zomato launched its on-demand parcel delivery business in October 2023 but closed it in July 2024 due to low demand.
For more such in-depth analyses, read Profit Pulse.
Lessons from the Masters
The approach of building Super Brands under one umbrella has worked successfully for Meta, the parent company of the platforms Facebook, Instagram, Whatsapp, and Threads. Meta acquired Instagram in 2012 and Whatsapp in 2014 as their growing active user base posed a threat to Facebook whose unique selling point was an active user base. By acquiring them and retaining the talent who built those platforms, Meta converted the threat into opportunity.
Taking a leaf out of Meta’s book, Zomato followed a similar acquisition strategy. In its Q4FY24 letter to shareholders, Deepinder Goyal said, “Even when we acquired Blinkit, we outlined that one of the key reasons to acquire the business was to defend the food delivery business because a well-entrenched quick commerce player could pose an easy threat to the food delivery business in the long term."
If we look at Blinkit's numbers, they are growing astronomically, and can easily dwarf the numbers of Zomato’s food delivery business.
Zomato’s quick commerce revenue almost tripled in FY24 to ₹2,301 crore as its gross order value (GOV) jumped to ₹12,469 crore in FY24 from ₹6,449 crore in FY23.
Another inspiration could be its very own angel investor Info Edge, the company behind four separately operating and distinct platform businesses - Naukri.com, Jeevansaathi.com, 99 acres, and Shiksha. All platforms run on the same base of newspaper classifieds in digital form. But while Naukri and 99 acres charge companies and property owners for listing, Jeevansaathi charges users.
For Info Edge, Naukri continues to be its golden goose, accounting for 75% of its revenue. It uses the net profit generated from these businesses to invest in other internet companies like Zomato, PolicyBazaar etc. Its ₹86 crore investment in Zomato from 2010-13 is now worth over ₹35,000 crore.
Walking in Info Edge’s footsteps, Zomato has invested in UrbanPiper, Shiprockret, Magicpin, Cult.fit, and plans to further invest in other upcoming platforms.
Having firmly entrenched its feet in the business of convenience, Zomato is now looking to monetise in those areas. Case in point – its acquisition of Blinkit.
Zomato’s current growth catalyst
The Blinkit acquisition turned out to be one of the best decisions for Zomato. Analysts are increasing their target price on Zomato as they have high expectations from Blinkit.
Goldman Sachs has put an implied value of ₹119 per share on Blinkit, surpassing the implied value of its food delivery business ( ₹98). It expects Blinkit’s GOV to grow at a 53% CAGR from FY2024-27 and surpass food delivery’s GOV and EBITDA by FY29.
JPMorgan raised Zomato's valuation by 63% from ₹208 for June 2025 to ₹340 for December 2025 citing strong growth potential in food delivery and quick commerce. It expects Blinkit's revenue growth to accelerate from 70% to 80% in FY26, and food delivery growth to increase from 15% to 19%.
The Big ‘If’
While it is easy to stay optimistic in a bull market, one has to be mindful of the risks. Zomato is currently enjoying the fruits of its volume and profits. As food delivery growth slows, quick commerce growth has set the ball rolling. However, the question remains – can the company sustain this profit momentum in the Going-Out business?
All eyes are now on how Zomato turns around its recently acquired Paytm ticketing business. Because Zomato’s stock price has surely pumped up its valuation. The stock is trading at 409x its earnings per share and 11.9 times its book value, hinting that investors have already priced in Blinkit’s EBITDA and GOV growth story.
Zomato’s business is highly susceptible to changing consumer habits. Like all internet companies, Zomato’s shares will potentially remain highly volatile. Nevertheless, its asset-light model, with almost no debt gives it the flexibility to sustain core business operations and experiment with new models like Zomato Legends, its intercity food delivery service it started in 2022, discontinued, tweaked, and relaunched in July 2024.
The market is ripe for quick commerce and the festive season will continue to grow Zomato’s numbers in the short term. However, talks around Swiggy’s IPO could divert some of Zomato’s investors to rivals, depending on the valuation Swiggy sets for its IPO.
It remains to be seen how the duopoly fairs in the stock market battleground.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Puja Tayal is a seasoned financial writer with over 17 years of experience in the field of fundamental research. She brings a good blend of comprehensive, well-researched insights into a company’s working in her articles.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
