Zomato’s Journey: A Transformation in India’s Internet Economy
Zomato, a prominent player in India’s internet market, has undergone significant changes over the past couple of years. Once a private business, it is now a public entity, solidifying its influence in the digital economy. This article explores Zomato’s transition, its strategic decisions, and how it has managed to lead in a competitive landscape.
A New Era Begins
In July 2021, a shift in India’s market regulations allowed new internet companies to go public more easily. Zomato was the first company to take advantage of these new rules, setting the stage for others like Paytm and Nykaa. Since its public listing, Zomato has been a star performer. Its stock price has increased threefold since the initial offering, and it even gained a spot in the prestigious BSE Sensex index in December, marking it as the first internet-focused firm to achieve this.
The Growth Trajectory
Despite its initial successes, Zomato faced significant challenges in its first year as a public company. The main struggle was balancing rapid growth with profitability. However, Zomato found a way to merge its innovative business model with the financial discipline required in public markets. This shift led to improvements not only in operational efficiency but also in stock performance.
Diversifying Through Acquisitions
Recognizing that its main food delivery service, which accounted for 86% of its revenue in the fiscal year 2022, could not sustain the expected rapid growth, Zomato realized it needed to expand its business. The company pursued two major acquisitions to diversify its offerings:
Blinkit: In June 2022, Zomato increased its stake in Blinkit (formerly known as Grofers), capitalizing on the rising trend of quick commerce, which focuses on delivering goods quickly, typically in under an hour.
- District: In August 2024, Zomato acquired Paytm’s ticketing business, which is now named District. This move aimed to position Zomato against established players like BookMyShow.
The impact of these acquisitions has been notable. Blinkit has emerged as a significant contributor to Zomato’s growth, with its revenue share rising sharply. In the fiscal year 2024, Blinkit’s contribution increased from 9.3% to 17%, showcasing the success of Zomato’s diversification strategy. Meanwhile, Zomato’s B2B supply business also gained traction, representing 23% of total revenue.
A Focus on Profitability
Zomato’s focus on improving its revenue composition is expected to continue in the coming years. As of May 2024, the company projected substantial growth rates, anticipating a 20% annual increase for its food delivery service and a remarkable 60% growth in quick commerce.
One of Zomato’s advantages is that its food delivery business is now profitable and does not require major new investments. This frees up funds for further investment in Blinkit and other initiatives. Currently, Zomato’s food delivery operates in 800 cities, while Blinkit is expanding its presence in densely populated areas.
Blinkit’s goal is to establish a stronger foothold in India’s eight largest cities, which involves setting up more dark stores for efficient 15-minute deliveries. This operational strategy has proven successful, as Blinkit reached its target of 1,000 dark stores by March 2025, demonstrating an impressive achievement compared to many internet companies striving for profitability.
Competing Rivals
Zomato’s main competitor, Swiggy, which went public later in November 2024, has struggled to attain profitability despite its significant presence in both food delivery and quick commerce. While Swiggy launched quick commerce services, it still lags behind Zomato in various aspects like customer base and cash flow.
Zomato has successfully leveraged its core business strengths while branching into adjacent markets. For instance, quick commerce and food delivery share many similarities, focusing on speed and convenience.
Strategic Financial Position
With Blinkit poised for growth, Zomato has the financial resources to support its future endeavors. As of December 2024, the company reported cash reserves exceeding ₹19,235 crore. This strong financial position, coupled with a bold expansion vision, lays the groundwork for Zomato’s next chapter.
Conclusion: A Bright Future Ahead
With its strategic acquisitions and a focus on both growth and profitability, Zomato is well-positioned to continue its ascent in India’s internet economy. The company is not only aiming to sustain its immediate successes but also seeks to define its legacy in the rapidly evolving digital landscape. As it moves forward, Zomato’s choices and innovations will undoubtedly shape the future of food delivery and commerce in the country, marking an exciting journey ahead.
