By Ananta Agarwal and Ashna Teresa Britto
(Reuters) -Indian food delivery major Zomato’s third-quarter profit more than halved on Monday, as rising competition in the quick commerce space and increased spending on opening more fulfilment centres for its Blinkit platform weighed on margins.
Net profit fell 57% to 590 million rupees ($6.8 million) in the quarter ended Dec. 31, from 1.38 billion rupees a year ago.
Zomato’s quick commerce platform Blinkit was a drag on profit. The segment’s adjusted core loss widened to 1.03 billion rupees from last year’s loss of 890 million rupees, even as orders surged.
Blinkit, a leader in India’s quick commerce space with a 46% market share, is facing fierce competition from rival Swiggy’s Instamart, start-up Zepto and deep-pocketed rivals such as Walmart-backed Flipkart and Tata Group’s BigBasket.
“Heightened competition has led to a pause in margin expansion in the business,” Blinkit CEO Albinder Dhindsa said in a statement, but added that it was “expected” and likely to be temporary.
Blinkit has through the year ramped up discounts and free deliveries, while investing in expanding the number of ‘dark stores’ and distribution warehouses, used to ship orders in urban centres.
Zomato shares, which were 1.5% higher ahead of results, reverse course to end 3.6% lower.
The company’s third-quarter revenue rose 64% to 54.05 billion rupees, as the period included festivals like Christmas and Deepavali, where Indians typically splurge on everything from sweets and snacks to clothing.
Revenue in its food delivery business increased nearly 22% in the quarter, while revenue from Blinkit surged more than two-fold.
“Currently we are going through a broad-based slowdown in demand which started during the second half of November,” said Rakesh Ranjan, food delivery CEO.
Food delivery is Zomato’s cash cow, accounting for more than 38% of total revenue, and is expected to grow 30% annually over five years, but investors’ focus is largely on the faster-growing Blinkit.
($1 = 86.5600 Indian rupees)
(Reporting by Ananta Agarwal and Ashna Britto in Bengaluru; Editing by Eileen Soreng)
