Did an analysis of the Q4 results of Zomato here. The major talking point in the earnings call + Q4 PPT was Blinkit (Quick Commerce) where Zomato has been expanding quite rapidly.

Here’s a brief summary:

Pros

Food Delivery

• Food Delivery as a segment has matured with reasonable growth rates – however contributes close to 60% of topline and is the only segment which is profitable at the EBITDA level.
• Revenue / EBITDA growth was flat however there was further expansion in margins
• Average MTC was UP, ATC of around 66 million (up 10% YoY)
• Launch of new service called ‘Large Order Fleet’ – to cater to large orders for parties, gatherings, events.
• Scaling up Zomato Everyday – a service to provide home cooked food at reasonable rates. This service is live in Gurugram + a few location in Bengaluru.

Quick Commerce

• All key metrics were UP. Blinkit achieved Adjusted EBITDA positivity in the month of March’24 and is gradually inching towards profitability.
• Management wants to double store count to reach 1000 stores by March’25. Expect addition of 100 stores in Q1FY25. Presence in 26 cities with Delhi NCR having the highest store count + GOV.
• Management wants to 4X GOV in non-metro NCR cities (top 8 cities) with a long term plan of having 400 / 500 stores in each metro.
• Margins in quick commerce have increased (which is a function of product margin + delivery fees + ad income)
• Average delivery fee per order was INR 20 – which the management will not reduce despite lower delivery fee offered by competition.
• At some point, Blinkit’s MTU > Zomato’s MTU

Others

• Strategy with HyperPure is to grow and not focus primarily on profitability because there is more room to grow as per the management.
• Going Out Segment has been growing well, would be interesting to see how it contributes to the bottomline in the future.

Cons

• Zomato is probably losing money on Gold program. There was no update on Gold pricing to better monetize the Gold program.
• With growth in Quick commerce, there could be some cannibalization of food delivery – since people can order vegetables and make food at home instead of ordering online.
• Increase in ESOP pool, would lead to increase in ESOP Costs affecting profitability.

At a P/E of >450 times (had to double check this) – at this valuation unless Zomato can double it’s profits every year, it doesn’t warrant a good entry point.

Disclosure: Not invested, tracking to see how long the frothy valuations can last.

Hi Mudit,

They generated around 16% from HT cables in FY24 and 7 odd % from EHV which would primarily linked to the power capex. The rest of the business would be LT, HW/WW, Exports. I think they had capacity constraints which is why exports was not as strong. So if India assuming was to slowdown in power capex then they should be able to at least capture somewhat of the slowdown by supplying to the US which is also upgrading their grid. Middle-East would be the other opportunity.

“Moat” is a much misunderstood word in the investor community but here is a classic case of what one looks like:

The main challenge for any new mutual fund is how to attract investors, most of whom would already be investors in other mutual funds. You can have your website and mobile app but then the investor must need you really badly so as to specifically download your app and invest. CAMS services most of India’s largest mutual funds. The myCAMS app has more than 5 million downloads and allows one to invest in any mutual fund serviced by CAMS. So essentially the MF has a “captive” potential customer base even if those people have not invested in your schemes at present. No wonder CAMS won all the three new MF mandates who set up a mutual fund in India last year.

A classic case of what a “moat” looks like.

Meanwhile, CAMS had an almost goldilocks kind of a Q4, where everything came together and worked in their favour. Gross and PAT margins were among the highest in history, growth rates were strong across the board and cash flows (for the year) increased faster than the revenues. Overall company revenue grew about 25 %, MF revenues at 21 %, and non-MF at 38 %. (52 % including inorganic).

The non-MF businesses contribution to revenues has gone up to 13.5 % from 11, in line with the 2 % increase every year expected. AIF grew 24 %, CAMSPay grew 24 %. Management expects EBIDTA margins to be maintained at current levels going ahead as well.

During the year, CAMS won every single mutual fund mandate that decided to set up shop in the country.

GIFT City business is scaling up, with a larger office being set up and a larger team in place. Client size has gone up to 17.

Fintuple has become profitable at the EBIDTA level. Fintuple provides digital onboarding solution and integrates Custody, Clearing, Fund Accounting, Treasury & Forex services DIGITALLY under one roof

KRA grew a huge 30 % Q-o-Q and 90 % over the year with penetration in fintechs picking up dramatically. I had mentioned in one of my previous posts that the PayTM Payments Bank crisis will provide a good tailwind to CAMS KRA business. (See this)

Management says KRA, CAMS Pay and AIF will continue to propel the non MF business growth in immediate future.

Meanwhile, the mandatory demat of insurance is still awaited but IRDAI has taken one step forward mandating digital policy issuance. Mandatory policy demat will take time, I think.

Government has opened up Atal Pension Yojana servicing to more players, so CAMS will now participate in this as well.

Management says expense growth will remain in line with historical trends going ahead as well. Current headcount is 7800, annual increments are due in April and the company invests around Rs.7 crore per quarter in new platforms.

Non MF margins have crept up from 15 % in the past to 20 % now as the businesses scale up, but the steady state is close to 35 – 40 % in the long run so there is considerable scope for them to move upward.

(taken from Q4 FY24 concall transcript)

(Disc.: Invested)

hi Sai,

I have been using this space as a journal of sorts. Its purely my opinion dude and i may be wrong. I have been living in chennai and during the floods i see lot of people complaining that funds arent utilized properly. roads in my vicinity that lead to hospital and schools are full of craters leading to accidents. I feel the infrastructure haven’t developed at the speed at which other states are developing theirs. the party still able to retain all their seats… i dunno may be its me , i prefer a change from this regime.

Thanks for the wishes dude, will hope to have some fun along the way as its in Coorg . Last i trekked Mount Batur dormant volcano which was 2 hours ascent and 3 hours on descent. some 8 kms total…

Sold out BSE today. Not played upto expectations even before last 2 days and wanted to add cash for next set of buys.

@Mudit.Kushalvardhan

You were right. Got battered yesterday. But long term looks extremely cheap and stable. Will keep holding and if goes below 400 will look to add.