Zomato Fundamental Analysis: The Business Buffet

Hey there! Why is Zomato Fundamental Analysis important? While the company’s financial health isn’t strong at present, its business is doing great. Does this mean the company holds growth prospects and potential future opportunities? To answer these questions, we need to carefully conduct Zomato Fundamental Analysis.

About the Company- Zomato fundamental analysis

Zomato Ltd. is an internet platform that brings together users, restaurants, and delivery partners. They help restaurants reach their customers through advertising and supply high-quality ingredients. The company operates in different areas: India Food Ordering and Delivery, Hyperpure, and All Other. It’s a top online food service platform by the value of food sold. Their mobile app is the most popular food and drinks app in India, downloaded a lot in the past three years from both the iOS App Store and Google Play. And now, their app receives around 90 billion visits each month in India as of FY23.

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Let us understand the Business segments of Zomato in detail

Navigating Zomato’s Diverse Ventures
Business Segments

Zomato, the name synonymous with discovering great places to eat, has evolved into much more than just a food app. It’s divided its operations into distinct segments, each catering to a specific aspect of the food ecosystem.

India Food Ordering and Delivery

One of Zomato’s core strengths lies in its India Food Ordering and Delivery segment. This sector is all about making your dining desires a reality. By linking up end-users, restaurants, and delivery personnel, Zomato creates a seamless pathway for food orders and quick deliveries. Impressively, their reach has skyrocketed in recent years. By Q2 of FY23, Zomato was clocking an average of 17.5 million monthly transactions. Not just that, they’ve roped in around 207,000 active food delivery restaurant partners and collaborated with a staggering 341,000 delivery partners. That’s quite the food delivery symphony!

Dining Out

Remember the joy of finding that perfect restaurant for a special occasion? That’s where Zomato’s Dining Out segment shines. It’s the go-to place to scout for amazing dining spots, read reviews, and plan your gastronomic adventures. While Zomato’s food delivery arm is a major success, they haven’t forgotten the thrill of dining in at a restaurant.

Hyperpure

Hyperpure is Zomato’s way of ensuring that the food that reaches your table is of the highest quality. This segment focuses on providing farm-to-fork supplies to restaurants, guaranteeing that what you’re served is not just delicious but also fresh and top-notch. Currently, Hyperpure serves a network of approximately 40,000 unique restaurants, ensuring that quality is never compromised.

All Other Ventures

Zomato’s explorations have led them into various other ventures too. While they’ve officially withdrawn from international markets, they’ve managed to forge a remarkable journey on the global food map. Additionally, Zomato has been on an acquisition spree. They’ve acquired 14 different companies from their inception until FY21. Post their Initial Public Offering (IPO), they even secured a 6.4% stake in Curefit Health Pvt Ltd for a cool 100 million USD.

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Zomato News Headlines

Zomato Fundamental Analysis: Essentials & Financials

Revenue and Growth: Zomato’s trailing 12-month operating revenue stands at Rs. 8,081.50 Crores, showcasing impressive annual revenue growth of 66%.

Return on Capital Employed (ROCE): Return on Capital Employed measures how well a company generates profits from its invested capital. A negative ROCE of -5.79% suggests that Zomato’s capital investments are not yielding profitable returns.

Return on Equity (ROE): Return on Equity indicates a company’s ability to generate returns for its shareholders. A negative ROE of -5.91% indicates that Zomato’s net income is not sufficient to cover shareholder equity.

Price-to-Earnings (P/E) Ratio: Not Provided The Price-to-Earnings ratio compares a company’s stock price to its earnings per share (EPS). Without the P/E ratio, it’s difficult to assess Zomato’s valuation compared to its earnings.

Earnings Per Share (EPS): Earnings Per Share represents the portion of a company’s profit allocated to each outstanding share of stock. An EPS of ₹0.00 might indicate that Zomato has either reported losses or hasn’t earned substantial profits.

Debt-to-Equity (D/E) Ratio: The Debt-to-Equity ratio signifies the proportion of debt in relation to equity. A D/E ratio of 0.03 suggests that Zomato’s debt is relatively low compared to its equity.

Dividend: The Dividend percentage reveals the portion of a company’s earnings distributed as dividends to shareholders. A dividend of 0.00% implies that Zomato isn’t currently distributing profits as dividends.

Market Capitalization: Market Capitalization represents the total value of a company’s outstanding shares in the stock market. Zomato’s market cap of ₹79,763 Crores reflects its valuation as determined by investors in the stock market.

The company’s current financial metrics seems to be challenging.

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Shareholding Pattern

In the quarter ending September 2023, FII/FPI holdings saw an uptick, rising from 54.43% to 54.72%. Moreover, the number of FII/FPI investors surged from 833 to 1036 during the same period. Mutual Funds also showed increased interest, with holdings growing from 8.30% to 10.56%. This was complemented by a rise in the number of MF schemes, from 22 to 28. Additionally, Institutional Investors bolstered their holdings, advancing from 64.36% to 67.76% in the same quarter.

Zomato Ltd Latest Quarterly Shareholding Pattern

A significant shift in Foreign Institutional Investor (FII) holding from December 2021 to September 2023 suggests notable changes in international investors’ interest and confidence in the company during that period. This shift could be influenced by various factors, such as changes in market conditions, the company’s financial performance, regulatory changes, global economic trends, and geopolitical events.

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Evaluating Financial Statements

On July 23, 2021, a truly remarkable moment unfolded in the financial world as Zomato, the pioneering online food delivery giant, stepped onto the stock market stage with a bang. The much-awaited occasion exceeded expectations, offering investors a delightful surprise following the company’s first-time public offering (IPO). Zomato’s stock took flight on the National Stock Exchange (NSE), reaching Rs 116 per share – a stunning premium of 53 percent over its initial offer price of Rs 76. Simultaneously, on the Bombay Stock Exchange (BSE), it embarked on its journey at Rs 115, boasting an impressive premium of over 51 percent. However, the company’s financial statements have revealed some negative trends, which we are going to discuss next in Zomato fundamental analysis.

Income Statements| Profit & Loss Statements

Revenues from Sales: Over a span of three years, precisely from March 2021 to March 2023, the sales revenue surged from 1,994 crores to an impressive 7,079 crores. In the most recent trailing twelve months period, this figure has further climbed to an impressive 8,082 crores. This translates to a remarkable growth rate of about 254.91% between March 2021 and March 2023, and an even more striking ascent of around 305.12% within the same trailing twelve months span, beginning from March 2021 to March 2023.

Operating Profit: Following the company’s listing in 2021, there was a significant downturn in the operating profit. It went from -467 crores in March 2021 to -1851 crores in March 2022, largely due to the company’s expenses surpassing its revenues. However, a positive shift emerged in the subsequent year. As of the trailing twelve months, the figure stands at -952 crores which is still a negative figure.

Net Profit: From March 2021 to March 2022, the company encountered a substantial decrease in net profit, plummeting from -816 crores to -1,222 crores. The decrease is approximately by 49.75%. By March 2023, although the figures remained predominantly negative, there was a noticeable enhancement from the preceding year, amounting to -971 crores. An improvement of approximately 20.56%. Looking at the trailing twelve months, the figure stands at -783 crores. The net profit improved by approximately 35.96% in the trailing twelve months from March 2022 to March 2023.

EPS & Dividend

EPS: Over the past two years, there has been a consistent upward trajectory in the EPS, despite it remaining in the negative. Notably, the figure has progressed from -1.54 Rs per share to -0.92 Rs per share in the trailing twelve months. The EPS improved by approximately 40.26%.

The positive percentage change indicates an enhancement in the EPS over the given period.

Dividend Yield: – The dividend payout for Zomato is Rs 0 and the yield is 0 % throughout the period.

Summing Up, The negative profit is indeed a cause for concern as it indicates financial losses and challenges in generating earnings. It’s crucial to analyze the underlying reasons and strategies for improvement.

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Cash Flows Statements

The Cash Flows are important as it tells how much money is coming in and going out of a company. It tells us how the company is paying its expenses and what are its strategies to expand further. That is, it prospects for future growth.

Cash From Operating Activities: From March 2021 to March 2023, there has been an improvement in Cash Flows from operating activities, shifting from a negative value of 1,018 crores to a comparatively lower negative value of 844 crores. An improvement of approximately 17.10%. This suggests a positive trend in the company’s ability to generate cash from its core business operations, even though the cash flow remains negative.

Cash From Investing Activities: The cash flows from investing activities have shown a fluctuating pattern from March 2021 to March 2023. The improvement from -5245 crores in March 2021 to 797 crores in March 2023 is of approximately 115.08%. It suggests a shift towards more positive investing activities, possibly indicating better management of capital expenditures, acquisitions, or divestitures.

Cash Flows From Financing Activities: The cash flows from financing activities have experienced a decline, decreasing from 6,402 crores in March 2021 to -127 crores in March 2023. This suggests a shift in the company’s financing strategies, potentially involving reduced borrowing, repayments, or changes in equity transactions. The negative value may indicate a focus on reducing financial obligations or raising capital through means other than traditional financing activities.

Net Cash Flow

In Zomato fundamental analysis, we have realised that the net cash flow has declined from a positive value of 139 crores in March 2021 to a negative value of -174 crores in March 2023. This indicates that the company’s overall cash inflows have decreased while its cash outflows have increased, potentially signifying challenges in generating positive cash flow and managing financial obligations during this period.

Limitations of Zomato

1. Challenging Return on Capital Employed (ROCE): The company’s ROCE stands at a poor -11.15% over the past 3 years. This indicates that the company is facing difficulties in generating satisfactory returns on the capital it has invested in its operations.

2. Negative Cash Flow from Operations: The company reports a negative cash flow from operations at -844. This suggests that its core business activities are not generating enough cash to cover operational expenses, possibly raising concerns about its financial sustainability.

3. Favorable Tax Rate: On a positive note, the tax rate is relatively low at 4.30%. This could potentially contribute to a higher net income, which might provide some stability despite other challenges.

4. Weak EBITDA Margin: The company’s EBITDA margin over the past 5 years is concerning, with a low of -68.70%. This indicates that the company has been struggling to maintain healthy profitability levels in relation to its earnings before interest, taxes, depreciation, and amortization.

But in order to maintain its long-term financial stability and development potential, it is imperative that the problems impacting operational effectiveness and profitability be resolved.

Important Highlights of Company’s past year performances

Impressive Profit Growth: The company has demonstrated commendable profit growth with a Compound Annual Growth Rate (CAGR) of 16.79% over the past 3 years and an even more remarkable 41% in the trailing twelve months (TTM). This upward trajectory signifies the company’s ability to enhance its earnings consistently.

Strong Revenue Growth: The company’s revenue growth has been robust, boasting a CAGR of 39.55% for the past 3 years and a substantial 70% in the TTM. This significant expansion reflects the company’s success in increasing its top-line figures.

These trends indicate that the company has managed to seize market opportunities effectively and has skillfully navigated its operations.

Zomato Fundamental Analysis: Highlights of Earnings And Revenues- Annual/Quarterly

In the previous year, the company witnessed a robust 65.6% increase in its annual revenue, reaching Rs 7,760.9 Crores. The company’s annual net profit also displayed a positive trajectory, growing by 19.6% in the past year to reach Rs 971.3 Crores. The stock price surged by an impressive 50.7% in the last year, outperforming its sector by an impressive 39.9%. This strong performance indicates investor confidence in the company’s prospects. The company’s Debt to Equity Ratio of 0, being less than 1, showcases a healthy financial structure. This suggests that the company primarily finances its assets through equity, minimizing financial risk.

In the latest quarter, Zomato experienced noteworthy YoY growth, with quarterly revenue rising by 70.9% to Rs 2,597 Crores and quarterly net profit increasing by a significant 101.1% to Rs 2 Crores.

ZOMATO reported -0.20 INR in earnings for the most recent quarter, beating estimates of -0.27 INR by 25.67%. Despite the expected value of 20.56B INR, the company’s revenue for the same time is 20.56B INR.

The anticipated quarterly loss is 0.03 INR, while the projected quarterly income is 23.94B INR.

BOTTOM LINE

Now we are in a state to sum up our Zomato fundamental analysis. In our analysis we made some real inferences about the company’s health and its prospects for future growth. On one hand, the company’s fundamentals are poor as almost all the important metrics are negative in numbers. However, the increase in the FIIs holdings states that the foreign investors have noticed something in the company. Despite the company’s current poor income statements, encouraging progress has been witnessed in the recent quarter. While the present scenario doesn’t support the long-term financial decision, a meticulous analysis unveils prospects that could unfold in the upcoming years.

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.