Zomato Ltd.
The Hyperlocal Hegemon
Recommendation
BUY
Target Price
₹230.00
Time Horizon
12M
Index Section
- Executive Summary 02
- Investment Thesis & Moats 03
- Blinkit: The Value Unlock 04
- Valuation & DCF Sensitivity 05
- ESG & Risk Mitigation 06
- Technical Snapshot 07
Strategic Core
The Platform Flywheel: Zomato is transition from a pure-play food delivery platform to a high-frequency commerce engine. By leveraging its 18M+ active transacting customers, the company is building a cross-sell moat that competitors cannot replicate without massive capital burn.
Key Metric
48% Zomato Gold Share
Unit Economics: Blinkit’s path to profitability is significantly faster than global peers (DoorDash/Deliveroo) due to higher population density in Indian Tier-1 cities and lower labor cost-per-delivery relative to order values.
Efficiency
₹18 Adj. EBITDA / Order
Executive Summary
ZOMATO LTD | TICKER: ZOMATO:IN
April 25, 2026
Sector: Consumer Internet
The Investment Case
We reiterate our BUY rating on Zomato Ltd. with a revised target price of ₹230 (previously ₹195). The company has demonstrated exceptional operational discipline, achieving consolidated PAT profitability ahead of consensus estimates. The core food delivery business has matured into a steady cash generator, allowing management to aggressively deploy capital into **Blinkit** and **Hyperpure**.
Blinkit's Dominance: Quick commerce is no longer an experiment; it is the primary growth engine. Blinkit's GOV (Gross Order Value) is projected to grow at a 65% CAGR over FY24-27E. We expect Blinkit to achieve its first full year of Adjusted EBITDA positivity in FY25, a critical milestone that will trigger a multi-year re-rating of the stock.
Margin Trajectory: Consolidated Adjusted EBITDA margins are expected to scale from 0.3% in FY24 to 13.5% by FY27E. This margin expansion is driven by: (i) operating leverage in food delivery, (ii) ad-monetization scaling across both apps, and (iii) improvement in dark store throughput for Blinkit.
Price Performance vs Benchmark (Indexed)
Analysis: Zomato has outperformed the Nifty 50 by 78% over the trailing 12 months. This outperformance is backed by a fundamental shift from 'Growth-at-all-cost' to 'Profitable-at-scale' architecture.
Strategic Deep-Dive
MOATS, COMPETITION & UNIT ECONOMICS
The Multi-Service Flywheel
Zomato is effectively building a **Super-App for Consumption** without the branding baggage. The transition of a user from food discovery to food delivery and then to quick commerce creates a massive data-moat.
Hyperpure (B2B Supply Chain): While often overlooked, Hyperpure is the "glue" that binds the restaurant ecosystem to Zomato. By supplying fresh ingredients to the very restaurants it delivers for, Zomato gains unprecedented visibility into restaurant quality, inventory cycles, and margins. This reduces platform risk and improves the reliability of the delivery service.
ONDC: A Real Threat or Paper Tiger?
The Open Network for Digital Commerce (ONDC) has emerged as a potential disruptor. However, we believe Zomato's moat is **operational, not just digital**.
ONDC Limitation
Fragmented delivery experience; no accountability for food quality/returns.
Zomato Edge
End-to-end stack ownership; 10-minute issue resolution; 99% fleet uptime.
Segmental Margin Expansion (FY24-27E)
Institutional SWOT
Strengths
Unrivaled hyperlocal network; Zomato Gold loyalty lock-in.
Weaknesses
High concentration in Top 10 cities for 80% of GOV.
Opportunities
Scaling ad-revenue to 15% of revenue; Private labels.
Threats
Swiggy IPO liquidity; Regulatory caps on platform fees.
"The next phase for Zomato is about 'Wallet Share', not just 'User Count'. By integrating groceries, pharma, and live events, they are becoming the default spending portal for the Indian middle class."
— Institutional Sentiment Analysis
Blinkit Performance
QUICK COMMERCE: THE NEW GROWTH PARADIGM
Blinkit: From Acquisition to Alpha
When Zomato acquired Blinkit (formerly Grofers) in 2022, markets were skeptical about the ₹4,447 Cr valuation. Today, Blinkit is valued by institutional investors at over **$8 Billion (₹66,000 Cr)** on a standalone basis.
The "Dark Store" Efficiency: Unlike traditional retail, Blinkit's dark stores are data-driven hubs. Every 100 meters of distance saved per delivery directly impacts the bottom line. With store density doubling in the next 24 months, we expect delivery costs to drop by another 15-20% through route optimization.
Blinkit GOV Trend (Quarterly Projection in ₹ Cr)
Unit Economics Breakdown (Estimated FY26E)
| Component (per order) | Food Delivery (FY26E) | Blinkit (FY26E) | Delta Analysis |
|---|---|---|---|
| Avg. Order Value (AOV) | ₹485 | ₹640 | Blinkit AOV is 32% higher due to basket diversity. |
| Commission & Platform Fee | ₹92 | ₹115 | Scaling ad-revenue to drive 200bps expansion. |
| Delivery Cost | ₹54 | ₹48 | Lower last-mile cost due to higher store density. |
| Variable Marketing | ₹12 | ₹18 | Higher CAC for QC but offset by LTV. |
| Contribution Margin | ₹26 | ₹49 | QC margin profile potentially superior at scale. |
Management Guidance Summary
Expansion
Planning to add 400 additional dark stores in FY25, focusing on suburban markets with high purchasing power.
Profitability
Aiming for 4-5% EBITDA margin at segment level by FY27. Current focus remains on market share over margin maximization.
Capital Allocation
No further major acquisitions planned. Cash reserves (₹12,000 Cr+) to be used for organic QC scaling.
Valuation Methodology
SUM-OF-THE-PARTS & DCF SENSITIVITY MATRIX
SOTP Valuation Bridge
Food Delivery
50x FY27E EBITDA • Dominant Market Position
₹142.00
61.7% of Value
Blinkit (Quick Commerce)
1.8x FY27E GOV • Hyper-growth phase
₹74.50
32.4% of Value
Hyperpure & Others
1.5x EV/Sales • Integrated supply chain
₹13.50
5.9% of Value
Equity Value per share
Indexed to FY27 Estimates
₹230.00
DCF Sensitivity Matrix
A critical analysis of how changes in terminal growth and WACC impact our valuation floor.
Target Price Sensitivity (Terminal Growth vs WACC)
| W / G | 4.5% | 5.0% | 5.5% | 6.0% |
|---|---|---|---|---|
| 11.0% | 198 | 212 | 228 | 245 |
| 11.5% | 185 | 204 | 218 | 232 |
| 12.0% | 172 | 195 | 210 | 225 |
| 12.5% | 160 | 182 | 198 | 212 |
Note: Our base case assumes a 11.5% WACC and a 5.5% terminal growth rate, reflecting the long-term consumption runway in India.
Analyst Verdict
"Zomato is currently trading at a 'Blinkit Option' discount. Investors are getting the food delivery business at a fair price while essentially getting the growth upside of the grocery segment for free."
ESG & Risk Mitigation
GOVERNANCE, LABOR & KEY QUESTIONS FOR MANAGEMENT
ESG Scorecard & Future Initiatives
Zomato has committed to 100% EV (Electric Vehicle) adoption for its fleet by 2030. Currently, 25% of deliveries in Delhi-NCR are on EV. This reduces operating costs by ~15% for partners over time.
Governance remains high with independent directors chairing Audit and Remuneration committees. The Blinkit acquisition was handled with high disclosure levels, mitigating related-party transaction concerns.
Key Questions for Management
What is the sustainable cap on platform fees before we see significant order elasticity or churn?
How does management plan to address the entry of Reliance Retail (Jiomart) into the 10-minute delivery segment?
Are there plans to monetize the massive Hyperpure warehouse data via Third-Party Logistics (3PL) services?
Technical Snapshot
CHART PATTERNS & FINAL RATING DISCLOSURE
Momentum & Breakout Analysis
"Zomato is currently trading in a clear bullish channel. The recent breakout above the ₹175 resistance has been confirmed by a 40% surge in average daily volume (ADV). We see immediate resistance at ₹205 and structural support at ₹168 (100-DMA)."
BUY
Target: ₹230
Horizon: 12-18 Months
Institutional Disclosure & Disclaimer
Analyst Certification: I, Sourav Mondal, Head of Institutional Research, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers and no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report.
Proprietary Interest: Capital Square Research and its affiliates may hold long or short positions in the securities of the company mentioned herein. Investors should consider this report as only a single factor in making their investment decision.
Risk Warning: Investing in equities involves substantial risk. Indian internet platforms are high-beta assets. The price of the securities mentioned may go down as well as up. Past performance is not a guarantee of future results. Please consult with a SEBI-certified financial advisor before executing any trades based on this data.
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