ZOMATO - Zomato Limited Share Price

Management's outlook for Eternal Limited emphasizes a continued focus on growth amidst heightened competition, particularly in the quick commerce space. They expect competition to intensify, especially from next-day delivery platforms, which has already begun to exert pressure on margins. Akshant Goyal, the CFO, indicated that competitive intensity remains high, stating, "we don't see any meaningful changes directionally," suggesting no relief in margin pressures.

Key points include:

1. Food Delivery Growth: Management has maintained a long-term growth target of over 20% CAGR for food delivery, viewing it as a realistic long-term projection rather than an immediate annual growth figure. They acknowledge a need to improve metrics like affordability and delivery timelines to foster growth. In Q4FY25, growth was reported at 16% year-over-year.

2. Investment in Expansion: Eternal continues to expand its network, with about 300 stores added in the last quarter. More focus is being given to stores in tier 2 and tier 3 cities, which now account for an increasing share of new openings.

3. Margin Stability under Pressure: Contribution margins remained stable, yet management highlights that lack of margin expansion is due to competitive pressures. They expect the competitive landscape to affect costs across all operational areas, including last-mile delivery and marketing.

4. Strategic Decisions: The closure of Zomato Everyday, which aimed at addressing affordability, was justified by management due to its limited scale impact. They emphasized focusing on core operations that enhance the customer experience.

5. Working Capital: Management indicated that working capital requirements could increase, stating, "the inventory days on books will go up as a result," especially if they shift towards products with lower turnover rates.

Overall, management remains cautious yet optimistic about potential growth, underlining their commitment to expanding their market presence while navigating competitive pressures.

1. Question from Manish Adukia (Goldman Sachs): What do you expect regarding competition in quick commerce, and where have you seen higher competition impacting costs?

Answer: The pressure we're observing arises from a lack of significant margin expansion due to increased competition. More competitors mean we're unable to charge higher delivery fees or push more high-margin categories. Thus, the competition manifests in the absence of margin growth rather than direct cost increases.

2. Question from Aditya Soman (CLSA): Can you provide insights on the new store openings, especially in smaller cities, and discuss the shut down of Zomato Everyday?

Answer: While we do not disclose exact city data, our expansions are increasingly focused on non-top eight markets with good customer adoption. Zomato Everyday performed well but didn't scale sufficiently to justify continued operation. We'll explore new concepts like Bistro over time.

3. Question from Swapnil Potdukhe (JM Financial): How do you report ad income in relation to your GOV and NOV metrics?

Answer: We do not include ancillary income from advertisements in our GOV or NOV definitions; it directly contributes to our revenue. Today, ad income accounts for over 4% of our GOV while customer fees make up about 3%.

4. Question from Sachin Salgaonkar (Bank of America): What's your view on market share in quick commerce, and how is Blinkit different in its approach?

Answer: Despite increased competition, we believe we have maintained our market share. Blinkit doesn't see value in using private labels because we are focused on providing better customer experiences without adding additional complexity.

5. Question from Abhisek Banerjee (ICICI): How has competitive pressure affected your last-mile delivery costs and marketing spends?

Answer: We cannot provide specifics on delivery costs, as it's competitively sensitive. Marketing expenditures have increased across various channels, reflecting our comprehensive strategy to maintain our position despite competitiveness.

6. Question from Gaurav Rateria (Morgan Stanley): How are you addressing the shortage of last-mile workers?

Answer: We anticipate the supply of last-mile workers to increase over time, similar to previous instances of shortage. While we're experiencing a supply-demand mismatch now, it's a temporary situation that will resolve itself.

These questions and responses summarize the earnings call's key insights, providing a clear picture of the company's stance on competition, strategies for growth, and operational challenges.