4 October 2022 India | Internet | Company Update

Zomato | BUY
Potential for value creation beyond food delivery
In its maiden post-listing AGM speech, Kaushik Dutta (Chairman of Board, Independent Swapnil Potdukhe
Director) mentioned that Zomato’s Hyperpure business – that undertakes B2B supplies to swapnil.potdukhe@jmfl.com | Tel: (91 22) 62241876

restaurants – could over the coming years become as big as or bigger than its Food Delivery Sachin Dixit
sachin.dixit@jmfl.com | Tel: (91 22) 66303078
business. We prima facie found that claim to be a bit ambitious despite us being believers
Abhishek Kumar
that there is indeed a significant growth runway. To better understand the operational plans abhishek.kumar@jmfl.com | Tel: (91 22) 66303053
around these verticals, we spent half a day at Zomato’s Hyperpure facility in Bhiwandi that Anuj Kotewar
caters to Mumbai MMR. We also spent the other half of the day visiting one of Blinkit’s 33 anuj.kotewar@jmfl.com | Tel: (91 22) 62241874
operational dark stores in Mumbai – primarily to re-test our thesis on the strong tailwinds (We acknowledge support services of Ankit Zope in
preparation of this report)
that we believe exists on Quick Commerce front. We were positively surprised by the level of
agility and the decentralised nature of operations at both facilities. There was also a very high
level of focus on cost savings and efforts to drive synergy benefits (e.g., integration of Recommendation and Price Target
Current Reco. BUY
Hyperpure and Blinkit supply chains). Our findings re-affirm our conviction on Zomato’s
Previous Reco. BUY
hyper-growth phase alongside profitability improvement over the coming years. Zomato is Current Price Target (12M) 125
our top-pick in the Internet space – we move our TP to INR 125 (from INR 115) as we now Upside/(Downside) 102.5%
also factor in Blinkit’s valuations. Previous Price Target 115
Change 9.2%
 Factors driving demand for Hyperpure: 1) One-stop shop solution: The Hyperpure app
acts as a one-stop shop for restaurants compared to 7-8 vendors that a typical restaurant Key Data – ZOMATO IN
otherwise engages for its sourcing needs. 2) On-demand, timely deliveries: Restaurants Current Market Price INR62
can make on-demand purchases – all orders placed by 11 PM on Hyperpure app are Market cap (bn) INR529.2/US$6.5
Free Float 100%
delivered the very next day, that too within a preferred time-slot. This is much more
Shares in issue (mn) 8,548.7
convenient for the restaurant compared to the need to bulk-up purchases in advance Diluted share (mn) 9,131.3
when sourcing from unorganised vendors (due to infrequent and inconsistent deliveries) 3-mon avg daily val (mn) INR9,563.7/US$116.8
that also necessitates higher working capital and storage space. 3) Quality assurance: 52-week range 169/41
Sensex/Nifty 56,789/16,887
Quality issues are limited compared to unorganised players and addressed through INR/US$ 81.9
standardised processes. 4) Wider assortment: Restaurants can order from more than 2k
SKUs across FMCG, fresh, perishables and gourmet products. Price Performance
% 1M 6M 12M
 Factors driving demand for Blinkit: 1) Lifestyle driven differentiation: Blinkit differentiates Absolute 3.6 -26.6 -55.1
its SKU assortment beyond the typical grocery, fresh and perishable products. Its offerings Relative* 7.3 -21.6 -53.2
include Home Décor, Pharma OTC, Pet Care, Stationary and Electronics, amongst others. * To the BSE Sensex

We also noticed some unusual assortment such as iPhone 14 & accessories, delicacies
from a local famous sweets-shop and festive favourites such as Lord Ganesha Idols,
Dandia Sticks and Gold & Silver coins (based on festive occasions). The differentiated
assortment is curated based on assessment of null searches or local team feedback. 2)
Customers valuing convenience: Blinkit continues to report rapid growth despite offering
one of the lowest discounts on product MRPs and charging delivery and packaging fees
on almost all orders (including surge fees in some cases). 3) Delighting the consumers:
Most orders are delivered in <15mins (attempt to deliver all orders in <20 mins). Order
bundling is avoided. Customers are presently not charged for cancellations/failed
deliveries. 4) Grofers legacy: Blinkit has been able to reactivate a substantial share of
customer base from the erstwhile Grofers.

Financial Summary (INR mn)

Y/E March FY21A FY22A FY23E FY24E FY25E
Net Sales 19,938 41,924 62,031 80,385 1,02,572
Sales Growth (%) -23.5 110.3 48.0 29.6 27.6 JM Financial Research is also available on:
EBITDA -4,672 -18,508 -10,574 -4,732 3,142 Bloomberg - JMFR <GO>,
EBITDA Margin (%) -23.4 -44.1 -17.0 -5.9 3.1
Adjusted Net Profit -4,881 -15,064 -5,762 -163 6,275
Thomson Publisher & Reuters,
Diluted EPS (INR) -0.9 -2.1 -0.7 0.0 0.8 S&P Capital IQ, FactSet and Visible Alpha
Diluted EPS Growth (%) 0.0 0.0 0.0 0.0 0.0
ROIC (%) -86.0 -75.3 -28.1 -15.6 3.4 Please see Appendix I at the end of this
ROE (%) -11.1 -12.2 -3.5 -0.1 3.6
report for Important Disclosures and
P/E (x) -68.2 -29.8 -88.2 -3,166.4 82.5
P/B (x) 4.1 2.7 2.9 2.9 2.7 Disclaimers and Research Analyst
EV/EBITDA (x) -89.7 -19.5 -34.9 -74.0 108.4 Certification.
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0
Source: Company data, JM Financial. Note: Valuations as of 03/Oct/2022

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Zomato 4 October 2022

 High focus on agile and decentralised operations: Our interactions indicated that Zomato,
across its businesses, encourages the local, on-ground operations teams to experiment
with differentiated ideas in micro geographies. This is followed up with frequent
inspections and quick strategy adaptations – akin to a fail fast philosophy.

 Hyperpure facility to double-up as a back-end fulfilment warehouse for certain Blinkit

operations: When we visited the Hyperpure facility, Zomato had completed the dry run of
migration of certain Blinkit operations to the same facility with a broad purpose to
leverage the former’s supply chain integrations with vendors in F&V and Perishables
categories. Currently, sourcing lines for Blinkit and Hyperpure are different, but going
ahead the partnerships can be cross-leveraged. In fact, the company had already started
servicing five out of the total 33 dark stores operational in Mumbai through this facility
with plans to start servicing all remaining dark stores in a matter of weeks. Accordingly,
the facility premises were clearly demarcated to segregate the inventory and SKUs of
Hyperpure and Blinkit. However, Blinkit continues to use a separate 3PL managed
warehouse to manage non-food, non-grocery products.

 Scale and standardisation of processes can lead to significant operating efficiencies: We

were surprised by the high capacity built-up in both the Hyperpure and Blinkit facilities
that we visited. Our broad takeaway was that the company remains confident of a sharp
scale-up in demand in both these businesses. Moreover, to our untrained eye,
dependence on human labour appeared high in several processes such as picking and
packing, receiving and stowing and dispatch. We, therefore, see massive room to derive
operating efficiencies at-scale and post-standardisation of certain easy to automate
processes.

 Addressable opportunity for Hyperpure remains huge: To understand this, we take the
example of Mumbai city that has a total of around 87,000 organised and unorganised
restaurants. Of this only around ~8,000 restaurants are presently ordering from
Hyperpure on a monthly basis, indicating a penetration rate of 9-10%. Even within those
restaurants where Hyperpure has penetrated, its wallet share stands around 5%.
Moreover, competition barring a few players like Ninjacart is unorganised in nature. This
indicates that there is a significant growth runway for Hyperpure in Mumbai.

 We see Quick Commerce disrupting the unorganised grocery market: We believe Quick
Commerce platforms are essentially disrupting consumer purchases done through the
unorganised channels - especially the neighbourhood kirana stores in large cities. Their broader
strategy seems to focus on driving the message that shopping on their online platforms is far
more convenient than having to take physical trips to the neighbourhood grocery/convenience
stores. The messaging of speed and convenience essentially addresses the pain-points of urban
families having busy lifestyles and nuclear families. High NPS scores for Quick Commerce
players compared to offline channel and scheduled delivery players are indicative of the
growing consumer satisfaction with the channel.

 Zomato - a long-term growth story, reiterate BUY: We remain bullish on the company’s
long-term growth prospects in the hyperlocal delivery space as we believe it is well
positioned to benefit from robust industry tailwinds such as improving tech penetration
and rising income share of digitally native millennials / GenZ. Our 15-year DCF TP for core
Zomato business stands unchanged at INR 115. However, Blinkit’s integration leads to a
revision in our TP to INR 125.

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Takeaways from our Hyperpure facility visit

 The Hyperpure facility that we visited had a built–up area of ~110k sq.ft. with a carpet
area of 86k sq. ft. It is leased on a monthly rent of INR 23-24 per sq.ft. Barring shelves,
racks, refrigeration and warehousing equipment, Zomato has not incurred any major
capex. The facility services restaurants in and around Mumbai MMR and nearby cities
such as Nasik and Lonavala.

 When we visited, Blinkit’s perishable and FMCG operations were getting migrated to the
facility (which were earlier managed by a 3PL player). The facility premises were clearly
demarcated to segregate inventory / SKUs of Hyperpure and Blinkit. Nevertheless, Blinkit
continues to use a separate warehouse to manage non-perishables.
 The facility currently manages supplies to ~7k monthly active accounts (each account may
have multiple restaurant outlets, so actual unique outlet count could be higher by 10-
15%); 10-15 new restaurants are getting onboarded every day at the facility.
 It has ~170 on-roll/off-roll staff (including security and housekeeping) in a 24-hour cycle.
There are also ~ 40-50 delivery associates for daily delivery of supplies to restaurants.
 Restaurants use the ‘Hyperpure’ app to make orders. Orders placed till 11 PM in a day are
typically serviced on the very next day at a time selected by the restaurant. Peak ordering
st
happens in the 1 week of the month. Peak days for orders in a week are Monday and
Friday. Second half of the year is seasonally strong due to festivities.

 The facility had despatches of 8-9 tonnes per day till a year back and is now managing c.
40 tonnes of despatches. It has capacity to cater to 170-180 tonnes and with
improvement in processes can also manage despatches of ~250 tonnes per day.
 Order description: Current AOV is ~INR 1,600. On average, each order comprises around
9-10 SKUs ranging from F&Vs, ready-to-eat, meat & dairy, oil and other FMCG products.
 Product gross margins vary from 5% (FMCG) to 25-30% (in case of packaging/gourmet
products). F&V gross margin is around 15%. Blended gross margin is in the low-teens.
 Product sourcing: The facility does inventory sourcing based on recent demand trends
while also taking into account tactical decisions such as cost of holding the inventory
versus margins. A few items such as onions and potatoes are contracted from vendors for
the whole year when prices are close to bottom. The company also works with a set of
contract farmers for hydroponic and exotic vegetables (on a fixed price and guaranteed
purchase contracts). 95% of the FMCG products are sourced directly from brands.
Imported products are sourced through importers. Depending on the product and
quantity, inward supplies are done through a mix of light and heavy commercial vehicles.
Supplier payments are made on average in 2 weeks.
 Inventory: The facility had 2000+ SKUs, of which F&V accounted for 150-170 SKUs (can
vary based on seasonality). Gourmet products (typically are not available with other B2B
vendors) accounted for 400+ SKUs. Most FMCG SKUs are different from standard retail
SKUs (e.g., 20kg of wheat flour). Standard SKU checks include manufacturing/expiry date
and manufacturer details, etc. basis the GRN. Based on quality, F&V are available under
three categories – mixed, farm and premium grade. Days of Inventory Hands – typically 6-
7 days, Gourmet products – 2 months, packaging products – up to 6 months.
 Wastage (including due to restaurant rejections/non-deliveries) is ~1.5% and goes up to
2.5% in peak rainy conditions. Majority wastage is in F&V category. Some waste is sold to
eco-waste processing vendors while some suppliers accept unsold products.
 Key challenges: 1) Capacity utilisation: While the facility that we visited had capacity to
cater to 170-180 tonnes of dispatches every day, current usage was limited to around 40
tonnes only; 2) Process Automation: Dependence on human labour appeared high in
processes such as picking and packing, receiving and stowing and dispatch; 3) Shrinkage:
At c.1.5% (2.5% in peak rainy weather), shrinkage (including returns from restaurants
due to quality issues or miss on delivery timeline) seems high; and 4) Stock-out:
Unavailability of certain products due to demand-supply mismatch is affecting sales by 3-
4%.

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Exhibit 1. Hyperpure app: Landing page interface for restaurants

Source: JM Financial

Exhibit 2. Hyperpure app: Product-wise interface

Source: JM Financial

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Exhibit 3. Hyperpure warehouse: Vehicle docking bays Exhibit 4. Hyperpure warehouse: Unloading of inward supplies

Source: JM Financial

Source: Company, JM Financial

Exhibit 5. Hyperpure warehouse: Large storage capacities Exhibit 6. Hyperpure warehouse: Racks are marked and have
barcodes for easy identification

Source: JM Financial Source: JM Financial

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Exhibit 7. Hyperpure warehouse: Fresh inward vegetables going Exhibit 8. Hyperpure warehouse: Automated packaging and filling
through a quality check machine

Source: JM Financial Source: JM Financial

Exhibit 9. Hyperpure warehouse: Chambers for Dairy, Meat, F&V and Exhibit 10. Hyperpure warehouse: Storage chamber for Dairy
Frozen are separate based on temperature requirement products

Source: JM Financial Source: JM Financial

Exhibit 11. Hyperpure warehouse: Storage chamber for F&V products Exhibit 12. Hyperpure warehouse: Storage chamber for Frozen
products

Source: JM Financial Source: JM Financial

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Exhibit 13. Hyperpure: Revenue (INR bn) trend Exhibit 14. Hyperpure: Active cities

Revenue (INR bn)

10 10
5.4

2.7

2.0

1.1 2
1
0.1

FY19 FY20 FY21 FY22 1QFY23 FY19 FY20 FY21 FY22 1QFY23
Source: Company, JM Financial Source: Company, JM Financial

Exhibit 15. Hyperpure: Unique Restaurant customer base (000’s) Exhibit 16. Hyperpure: Average Revenue per restaurant (INR 000’s)

51k 430k

37k 307k*

25k

140k 137k 141k

4k
1k

FY19 FY20 FY21 FY22 1QFY23 FY19 FY20 FY21 FY22 1QFY23
Source: Company, JM Financial Source: Company, JM Financial. * Annualised

Exhibit 17. Hyperpure Gross margin trend Exhibit 18. Adj. EBITDA and EBITDA margin trends
Adj. EBITDA (INR bn, lhs) Adj. EBITDA margin (rhs)
6.9%
0.0 0%
3.6%
2.4% -0.1
-0.2 -10%

-13% -20%
-0.4 -23%
-1.2% -22% -0.4 -30%
-0.5 -0.5
-0.6
-40%
-0.8
-50%
-46%
-1.0
-60%
-1.2 -70%
-18.5% -75% -1.2
FY19 FY20 FY21 FY22 1QFY23 -1.4 -80%
FY19 FY20 FY21 FY22 1QFY23
Source: Company, JM Financial Source: Company, JM Financial

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Takeaways from our Quick Commerce Dark Store facility visit

 Dark stores are generally located in dense localities closer to premium residential housing
societies. Commercial or industrial complexes are preferred as that helps significantly cut
down on rental costs. A typical new store set-up cost in Mumbai would be ~INR 1.5mn –
major capex goes towards racks, freezers, chillers, and IT infra (including CCTVs).
Including lease deposit and capex, the amount required to operationalise a store would
be ~INR 2.5mn. Scouting a store location to going live takes around 1 month.
 Delivery radius for dark stores ranges from 3km to 3.5km per dark store. As on the date
of our visit, Blinkit had 33 operational dark stores in Mumbai with a serviceable coverage
area of 300 sq. km. Two-thirds of these stores are managed by Blinkit while the rest are
managed by partners.
 At the time of our visit, Mumbai was reporting DAUs of 70,000+ per day with daily
orders of 20,000+ indicating a healthy conversion rate of ~30%.
 Each dark store carries 4,000-5,000 SKUs. Typical inventory days vary from 5-7 days
based on units of measurement and size of items. These SKUs are classified under three
categories – F&V, Perishables (shelf life of <3-4 days) and packaged goods. Fresh and
perishables are replenished twice a day while packaged items (mainly groceries) are
replenished once a day. Typically, one replenishment vehicle services two stores.
 Dynamic assortment correction – depending on seasonality, a few SKUs are stocked or
removed in the dark store. For e.g., during the festive season, fresh non-veg items are
typically not stocked while festival-related items are brought in.
 Blinkit has developed an automatic replenishment system to optimise storage, which is in
sync with scanners and barcodes, ensuring easy identification of SKUs by pickers.
 Order fulfilment: Picking, packing and billing of an order with 6-7 SKUs takes ~2.5mins
from the time it is received. Overall, target is to deliver within 15mins (median time pre–
rainy season was 11mins in Mumbai).
 Store staff (Picker/Packer) earns INR 14-16k per month. With working conditions that are
remarkably better than those in the unorganised sector, staff finds themselves
compensated well.
 Fail Fast: Store churn is quite frequent in cases where scale-up does not happen within a
time-bound period. In such cases, an alternative location is experimented such that it is
closer to the catchment area. Typically, if a new store fails to reach 600/1,000 orders per
day within 3/6 months of its launch, it is highly likely to be churned.
 Area of the store we visited was 2,500 sq.ft. It had been in operation for about 6 months
and was doing around 1,000 orders per weekday (up from 750 orders per day a couple
of months back) and 1,200 orders on weekends. Expectation was that orders per day
could exceed 1,500 by Diwali based on recent momentum.
 It had 21 staff including a store manager and a team leader who worked in two shifts of
6 AM – 3PM and 3 PM -12 PM; except store manager, all others were contractual staff.
 The store was supported by 40 dedicated delivery riders. Each rider delivers around 25
orders per day on average and earns ~INR 50 per order. Riders on average work for
around 10-11hrs per day, thereby delivering more than 2 orders per hour. Typical per
order weight carried by a delivery rider ranges between 2-7kg with incremental earning
for carrying heavier orders. Riders are paid INR 10-15 extra per order when it rains. Full-
time riders earn >INR 30k per month at a gross level. They are, however, expected to bear
the costs of fuel and maintenance of the vehicle. Stores may also have part-time riders
who do 10 orders per day – making INR 12-13k per month. Some stores have women
working in stores, as rider partner and security personnel.
 AOV was INR 500+. Each order comprises 6-7 SKUs. Delivery charges are INR 25 if AOV
<INR 150 and INR 15 for remaining orders. Packaging cost of INR 2 per is levied on all
orders. Surge charge is applied as and when there is rider shortage (typically during peak
time of 5 PM - 10 PM). Cash on delivery accounts for less than one-fourth of the total
orders. Wastage per order is less than INR 5.
 Typical GMV break-up: F&V - 15%, Perishables (bread, milk, fresh meat, etc.) - 15% and
packaged goods (including frozen products) - 70%.

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Exhibit 19. Step-by-step picker workflow for a dark-store picker from the time an order is placed

Device App
Picker App directs Picker
guides the Picker matches App
accepts the the picker Picker Picker handovers
Customer picker to scans the the displays
order on a to the next packs all marks the the order
places the the barcode of scanned delivery
hand held product the items order as to the
order location of the order product executives
smart item in order complete delivery
each order item with order details
device location executive
item placed

Source: JM Financial

Exhibit 20. Dark store location: Backyard of a commercial complex Exhibit 21. Dark store: Order pick-up zone for delivery executives

Source: JM Financial Source: JM Financial

Exhibit 22. Inside Blinkit dark store – Grocery SKUs Exhibit 23. Inside Blinkit dark store – Ready to eat and Snacking SKUs

Source: JM Financial Source: JM Financial

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Exhibit 24. Inside Blinkit dark store – Differentiated SKUs ranging Exhibit 25. …to iPhones and other electronics such as Chargers and
from Stationary, HomeCare… Power banks

Source: JM Financial Source: JM Financial

Exhibit 26. Inside Blinkit dark store – Chilled SKU assortment -1 Exhibit 27. Inside Blinkit dark store – Chilled SKU assortment - 2

Source: JM Financial Source: JM Financial

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Exhibit 28. Inside Blinkit dark store – Frozen Foods SKUs Exhibit 29. Inside Blinkit dark store – Confectionary SKUs

Source: Company, JM Financial Source: Company, JM Financial

Exhibit 30. Blinkit operational performance

July vs
Jan'22 May'22 July'22 Jan'22 May'22 July'22 Jan'22 May'22 July'22 Jan'22 May'22 May'22
May
Assuming 1 USD = INR 78 Monthly basis (INR) Monthly basis (USD) Annualised Run-rate (INR) Annualised Run-rate (INR)
Financials
GOV (mn) 2,955 4,028 4,827 20% 38 52 62 35,460 48,336 57,924 455 620 743
Revenue (mn) 221 580 749 29% 3 7 10 2,652 6,960 8,988 34 89 115
Take-Rate 7.5% 14.4% 15.5% 110 bps 7.5% 14.4% 15.5% 7.5% 14.4% 15.5% 7.5% 14.4% 15.5%
Direct Costs (mn) 1,840 1,241 1,212 -2% 24 16 16 22,080 14,892 14,544 283 191 186
Contribution Profit (mn) -1,619 -661 -463 +30% -21 -8 -6 -19,428 -7,932 -5,556 -249 -102 -71
Contribution margin (% of GOV) -55% -16% -10% 680 bps -55% -16% -10% -55% -16% -10% -55% -16% -10%
Contribution margin (% of Revenue) -733% -114% -62% 5,210 bps -733% -114% -62% -733% -114% -62% -733% -114% -62%
Fixed Costs (mn) 421 416 466 12% 5 5 6 5,052 4,992 5,592 65 64 72
Adjusted EBITDA (mn) -2,040 -1,077 -929 14% -26 -14 -12 -24,480 -12,924 -11,148 -314 -166 -143
Adjusted EBITDA (% of GOV) -69% -27% -19% 750 bps -69% -27% -19% -69% -27% -19% -69% -27% -19%
Adjusted EBITDA (% of Revenue) -923% -186% -124% 6,170 bps -923% -186% -124% -923% -186% -124% -923% -186% -124%
Operating metrics
Orders (mn) 5.1 7.9 8.3 5% 5.1 7.9 8.3 61 95 100 61.2 94.8 99.6
AOV 575 509 580 14% 7.4 6.5 7.4 575 509 580 7.4 6.5 7.4
Dark store metrics
GOV per day per dark store (mn) 0.206 0.312 0.402 29% 0.0026 0.0040 0.0052 75.2 113.9 146.7 1.0 1.5 1.9
Orders per day per dark store (no.) 359 613 694 13% 359 613 694 131,035 223,745 253,310 131,035 223,745 253,310
Dark store count 450 400 386
SKUs per store 4,000
Cities present 15 15
Source: Company, JM Financial

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Exhibit 31. Zomato: SOTP Valuation

Description FV as of Mar'23
Zomato: DCF-based Equity Value (INR bn) 964
Blinkit: DCF-based Equity Value (INR bn) 173
SOTP Value (INR bn) 1,136
Diluted equity shares post acquisition (bn) 9.13
Zomato FV in INR per share (including Blinkit, rounded-off) 125
Zomato FV in INR per share (excluding Blinkit) 115
Change in FV 9%
Source: JM Financial

Key Risks
 Key upside risks to our price target are: (1) Sharp rise in transacting users driven by
growing share of working age digitally native millennial/GenZ population; (2) Better-than-
expected AOV growth; (3) Synergy benefits from rapid expansion of Hyperpure and
dining-out businesses and (4) Significant value accretion from organic/inorganic
expansion in adjacent verticals.

 Key downside risks are: (1) Slower-than-expected tech penetration in India; (2) Sharp
increase in competitive intensity; (3) Continued stakeholder conflicts such as allegations of
unfair trade practices from food services industry bodies such as NRAI, amongst others (4)
Technology failures and data breaches (5) Regulatory risks: Uncertainty around the likely
implications for tech-platforms such as Zomato if the new labour laws are implemented in
India. (6) Organic/inorganic investments fail to deliver.

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Financial Tables (Consolidated)

Income Statement (INR mn) Balance Sheet (INR mn)
Y/E March FY21A FY22A FY23E FY24E FY25E Y/E March FY21A FY22A FY23E FY24E FY25E
Net Sales 19,938 41,924 62,031 80,385 1,02,572 Shareholders’ Fund 80,987 1,65,055 1,65,218 1,69,204 1,78,591
Sales Growth -23.5% 110.3% 48.0% 29.6% 27.6% Share Capital 0 7,643 7,643 7,643 7,643
Other Operating Income 0 0 0 0 0 Reserves & Surplus 80,987 1,57,412 1,57,575 1,61,561 1,70,948
Total Revenue 19,938 41,924 62,031 80,385 1,02,572 Preference Share Capital 0 0 0 0 0
Cost of Goods Sold/Op. Exp 0 0 0 0 0 Minority Interest -57 -66 -78 -90 -102
Personnel Cost 7,408 16,331 13,898 13,342 13,542 Total Loans 14 0 0 0 0
Other Expenses 17,202 44,101 58,707 71,775 85,888 Def. Tax Liab. / Assets (-) -498 -670 -991 -1,285 -1,641
EBITDA -4,672 -18,508 -10,574 -4,732 3,142 Total - Equity & Liab. 80,446 1,64,319 1,64,148 1,67,829 1,76,848
EBITDA Margin -23.4% -44.1% -17.0% -5.9% 3.1% Net Fixed Assets 14,787 13,407 12,312 11,513 10,755
EBITDA Growth 0.0% 0.0% 0.0% 0.0% 0.0% Gross Fixed Assets 1,137 1,393 1,608 2,011 2,480
Depn. & Amort. 1,377 1,503 1,685 1,592 1,647 Intangible Assets 14,553 12,892 11,892 11,060 10,283
EBIT -6,049 -20,011 -12,259 -6,323 1,495 Less: Depn. & Amort. 904 884 1,194 1,564 2,014
Other Income 1,146 4,829 6,485 6,148 6,879 Capital WIP 0 6 6 6 6
Finance Cost 0 0 0 0 0 Investments 63,989 1,21,703 1,14,203 1,14,203 1,14,203
PBT before Excep. & Forex -4,904 -15,182 -5,774 -175 8,374 Current Assets 7,761 37,490 47,921 53,365 66,285
Excep. & Forex Inc./Loss(-) 0 0 0 0 0 Inventories 148 397 1,375 838 1,743
PBT -4,904 -15,182 -5,774 -175 8,374 Sundry Debtors 1,299 1,599 3,160 2,567 4,740
Taxes 13 20 0 0 2,110 Cash & Bank Balances 3,065 3,923 3,030 21,684 31,116
Extraordinary Inc./Loss(-) 3,248 -2,974 0 0 0 Loans & Advances 0 0 0 0 0
Assoc. Profit/Min. Int.(-) -36 -138 -12 -12 -12 Other Current Assets 3,249 31,571 40,357 28,277 28,687
Reported Net Profit -8,128 -12,090 -5,762 -163 6,275 Current Liab. & Prov. 6,092 8,281 10,288 11,252 14,396
Adjusted Net Profit -4,881 -15,064 -5,762 -163 6,275 Current Liabilities 3,823 4,994 5,972 5,740 7,773
Net Margin -24.5% -35.9% -9.3% -0.2% 6.1% Provisions & Others 2,269 3,287 4,315 5,512 6,623
Diluted Share Cap. (mn) 5,366.4 7,237.7 8,195.5 8,348.1 8,348.1 Net Current Assets 1,669 29,209 37,634 42,113 51,890
Diluted EPS (INR) -0.9 -2.1 -0.7 0.0 0.8 Total – Assets 80,446 1,64,319 1,64,148 1,67,829 1,76,848
Diluted EPS Growth 0.0% 0.0% 0.0% 0.0% 0.0% Source: Company, JM Financial
Total Dividend + Tax 0 0 0 0 0
Dividend Per Share (INR) 0.0 0.0 0.0 0.0 0.0
Source: Company, JM Financial

Cash Flow Statement (INR mn)

Dupont Analysis
Y/E March FY21A FY22A FY23E FY24E FY25E
Y/E March FY21A FY22A FY23E FY24E FY25E
Profit before Tax -8,151 -12,205 -5,777 -175 8,374
Net Margin -24.5% -35.9% -9.3% -0.2% 6.1%
Depn. & Amort. 1,377 1,503 1,685 1,592 1,647
Asset Turnover (x) 0.4 0.3 0.4 0.5 0.6
Net Interest Exp. / Inc. (-) -99 -3,849 -6,485 -6,148 -6,879
Leverage Factor (x) 1.2 1.0 1.0 1.0 1.0
Inc (-) / Dec in WCap. -7,567 2,483 -1,999 1,353 -812
Others 4,075 5,330 5,928 4,149 3,112 RoE -11.1% -12.2% -3.5% -0.1% 3.6%

Taxes Paid 186 -192 -321 -293 -2,467

Operating Cash Flow -10,179 -6,930 -6,969 477 2,976 Key Ratios
Capex -104 -572 -215 -403 -470 Y/E March FY21A FY22A FY23E FY24E FY25E
Free Cash Flow -10,284 -7,502 -7,184 74 2,506 BV/Share (INR) 15.1 22.8 21.1 21.5 22.7
Inc (-) / Dec in Investments -52,237 -53,668 7,500 0 0 ROIC -86.0% -75.3% -28.1% -15.6% 3.4%
Others -95 -25,138 -1,020 18,734 7,030 ROE -11.1% -12.2% -3.5% -0.1% 3.6%
Investing Cash Flow -52,436 -79,378 6,266 18,331 6,560 Net Debt/Equity (x) -0.8 -0.8 -0.7 -0.8 -0.8
Inc / Dec (-) in Capital 66,055 90,000 0 0 0 P/E (x) -68.2 -29.8 -88.2 -3,166.4 82.5
Dividend + Tax thereon 0 0 0 0 0 P/B (x) 4.1 2.7 2.9 2.9 2.7
Inc / Dec (-) in Loans -166 -216 4 26 46 EV/EBITDA (x) -89.7 -19.5 -34.9 -74.0 108.4
Others -1,870 -2,286 -194 -180 -151 EV/Sales (x) 21.0 8.6 5.9 4.4 3.3
Financing Cash Flow 64,019 87,498 -190 -154 -105 Debtor days 24 14 19 12 17
Inc / Dec (-) in Cash 1,403 1,190 -893 18,654 9,431 Inventory days 3 3 8 4 6
Opening Cash Balance 1,662 2,733 3,923 3,030 21,684 Creditor days 44 26 26 21 26
Closing Cash Balance 3,065 3,923 3,030 21,684 31,116 Source: Company, JM Financial
Source: Company, JM Financial

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History of Recommendation and Target Price Recommendation History

Date Recommendation Target Price % Chg.

28-Jul-21 Buy 170

11-Aug-21 Buy 170 0.0

3-Sep-21 Buy 170 0.0

11-Nov-21 Buy 180 5.9

29-Nov-21 Buy 180 0.0

3-Feb-22 Buy 180 0.0

11-Feb-22 Buy 155 -13.9

2-Mar-22 Buy 140 -9.7

25-May-22 Buy 115 -17.7

26-Jun-22 Buy 115 0.0

2-Aug-22 Buy 115 -0.4

11-Aug-22 Buy 115 0.6

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APPENDIX I

JM Financial Inst itut ional Secur ities Lim ited

Corporate Identity Number: U67100MH2017PLC296081
Member of BSE Ltd., National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd.
SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst – INH000000610
Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.
Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: jmfinancial.research@jmfl.com | www.jmfl.com
Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: sunny.shah@jmfl.com

Definition of ratings
Rating Meaning
Buy Total expected returns of more than 10% for large-cap stocks* and REITs and more than 15% for all other stocks, over the next twelve
months. Total expected return includes dividend yields.
Hold Price expected to move in the range of 10% downside to 10% upside from the current market price for large-cap* stocks and REITs and
in the range of 10% downside to 15% upside from the current market price for all other stocks, over the next twelve months.
Sell Price expected to move downwards by more than 10% from the current market price over the next twelve months.
* Large-cap stocks refer to securities with market capitalisation in excess of INR200bn. REIT refers to Real Estate Investment Trusts.
Research Analyst(s) Certification

The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:

All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and

No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research
report.

Important Disclosures

This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the
company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select
recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written
consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.
JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst and a Stock Broker having trading
memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Metropolitan Stock Exchange of India Ltd. (MSEI). No material disciplinary
action has been taken by SEBI against JM Financial Institutional Securities in the past two financial years which may impact the investment decision making of the
investor.
JM Financial Institutional Securities renders stock broking services primarily to institutional investors and provides the research services to its institutional
clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated investment banking, investment management,
brokerage and financing group. JM Financial Institutional Securities and/or its associates might have provided or may provide services in respect of managing
offerings of securities, corporate finance, investment banking, mergers & acquisitions, broking, financing or any other advisory services to the company(ies)
covered herein. JM Financial Institutional Securities and/or its associates might have received during the past twelve months or may receive compensation from
the company(ies) mentioned in this report for rendering any of the above services.
JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell
the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) covered under this report or (c) act as an advisor or lender/borrower to,
or may have any financial interest in, such company(ies) or (d) considering the nature of business/activities that JM Financial Institutional Securities is engaged in,
it may have potential conflict of interest at the time of publication of this report on the subject company(ies).
Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or
more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research Analysts) Regulations, 2014.
The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited from buying or selling
debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report.
The Research Analyst(s) principally responsible for the preparation of this research report or their relatives (as defined under SEBI (Research Analysts) Regulations,
2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the company(ies) covered
under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time of publication of this
report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.
While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or
developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This
report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision.

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Zomato 4 October 2022

The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. The user assumes the entire risk of
any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities reserves the right to
make modifications and alterations to this statement as they may deem fit from time to time.
This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.
This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any locality, state, country or
other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject JM Financial Institutional
Securities and/or its affiliated company(ies) to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be
eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this report may come, are required to inform themselves of
and to observe such restrictions.
Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala (ruchir.jhunjhunwala@jmfl.com) on +65 6422 1888 in
respect of any matters arising from, or in connection with, this report.
Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities, Inc. ("JM Financial
Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to conduct certain business in the
United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgated under the U.S. Securities Exchange Act of
1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission ("SEC") (together "Rule 15a-6").
This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research report" for
purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutional investors" as defined in Rule
15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If you have received a copy of this research report and are
not a major U.S. institutional investor, you are instructed not to read, rely on, or reproduce the contents hereof, and to destroy this research or return it to JM
Financial Institutional Securities or to JM Financial Securities.
This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible for its content. The
research analyst(s) preparing this research report is/are resident outside the United States and are not associated persons or employees of any U.S. registered
broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or otherwise required to satisfy the regulatory licensing
requirements of FINRA and may not be subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.
JM Financial Institutional Securities only accepts orders from major U.S. institutional investors. Pursuant to its agreement with JM Financial Institutional Securities,
JM Financial Securities effects the transactions for major U.S. institutional investors. Major U.S. institutional investors may place orders with JM Financial
Institutional Securities directly, or through JM Financial Securities, in the securities discussed in this research report.
Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the United Kingdom (U.K.) by the
Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii)
are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside
the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000) in connection with the matters to which this report relates may otherwise lawfully be communicated or caused to be
communicated (all such persons together being referred to as "relevant persons"). This report is directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will
be engaged in only with relevant persons.
Additional disclosure only for Canadian persons: This report is not, and under no circumstances is to be construed as, an advertisement or a public offering of the
securities described herein in Canada or any province or territory thereof. Under no circumstances is this report to be construed as an offer to sell securities or as
a solicitation of an offer to buy securities in any jurisdiction of Canada. Any offer or sale of the securities described herein in Canada will be made only under an
exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable
securities laws or, alternatively, pursuant to an exemption from the registration requirement in the relevant province or territory of Canada in which such offer or
sale is made. This report is not, and under no circumstances is it to be construed as, a prospectus or an offering memorandum. No securities commission or
similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities
described herein and any representation to the contrary is an offence. If you are located in Canada, this report has been made available to you based on your
representation that you are an “accredited investor” as such term is defined in National Instrument 45-106 Prospectus Exemptions and a “permitted client” as
such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Under no circumstances is the
information contained herein to be construed as investment advice in any province or territory of Canada nor should it be construed as being tailored to the
needs of the recipient. Canadian recipients are advised that JM Financial Securities, Inc., JM Financial Institutional Securities Limited, their affiliates and authorized
agents are not responsible for, nor do they accept, any liability whatsoever for any direct or consequential loss arising from any use of this research report or the
information contained herein.

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