Zomato shares in a free fall as Q3 results, cautious management commentary dent investor sentiment; Swiggy also tumbles

The stock price slipped up to 13.3% lower at ₹207.80 on the NSE.

Zomato, which owns Blinkit, on Monday reported a 57.2% decline in consolidated net profit to ₹59 crore for the third quarter ended December.

The company had earned a net profit of ₹138 crore in the same quarter a year ago.

The company's consolidated revenue from operations stood at ₹5,405 crore, as against ₹3,288 crore in the corresponding October-December quarter of the previous financial year.

However, during the quarter under review, Zomato's total expenses also shot up to ₹5,533 crore, from ₹3,383 crore in the corresponding period of 2023-24.

The revenue reporting segments for the group include India food ordering and delivery; Hyperpure supplies (B2B business); quick commerce; going out; and all other segments (residual).

Commenting on the company's performance, brokerage firm Nomura said Zomato's food delivery business's performance was subpar in the third quarter. It has delivered less growth in gross order values than what the brokerage expected.

Now, Nomura expects the food delivery business to deliver 17–20% growth in GOV in FY 2025 and 2026, with a contribution margin of 8–9%. Blinkit remained focused on store expansion because of its low penetration levels.

Zomato's quick commerce arm already advanced its store count target of 2,000 by the end of this year because of the scale-up of its store addition capability and higher competition in the space. It has already expanded Blinkit's store count to 1,007 in nine months of the financial year 2025.

In the letter to shareholders, Zomato said, "To us, the biggest impact of the intensifying competition has been the acceleration in customer awareness and adoption of quick commerce. We have seen this play out in the early days of the food delivery business as well when heightened competition led to higher investments in customer acquisition across the industry as a whole. This eventually (disproportionately) benefitted players with sustained, good-quality execution."

In addition to that, heightened competition has led to a pause in margin expansion in the business, which is expected and should be temporary.

"So far, we have not seen any attrition of our core customers, which tells us that customers are continuing to choose Blinkit over other options," the letter added.

In the rub-off effect, Swiggy shares, too, tumbled in the trade. The stock was trading 11% lower on the NSE.