Zomato’s road to profitability is looking more and more like a complicated obstacle course. The company posted a contribution profit (revenue minus expenses per order) last year, giving investors the confidence that Zomato could be in the black sooner than later. But then came its reported all-stock acquisition of cash-strapped quick-commerce grocery business Blinkit. To top that, Zomato also announced 10-minute delivery for its own core business—food. Called Zomato Instant, the concept will be piloted in the north Indian city of Gurugram, Zomato’s home base, next month. Not surprisingly, the announcement went over like a lead balloon. The problem with 10-minute food delivery, though, is that customers aren’t going to be able to order meals. Instead, Zomato Instant’s offerings—tea, coffee, momos, and instant noodles—are dishes ordered between meals. Zomato Instant could end up dragging down average order values, turning the one good metric it had—contribution margins—negative. And Blinkit, which promises grocery deliveries in 10 minutes, reportedly burnt through $79 million just between November and February. While that alone probably adds an extra just-for-laughs maze into the obstacle course, things are about to get far more complicated. Rival Zepto raised $160 million in just two months late last year, and Swiggy committed $700 million to its own quick-commerce offering, Instamart. Quick-commerce is a segment better suited to venture money than retail investor money, say experts. Zomato is now faced with the prospect of immense cash burn. And while that would have been relatively okay if it was a private company, retail investors don’t take too kindly to companies blowing through cash without any results to show for it and no light at the end of the tunnel. Already, its current market cap of Rs 63,200 crore ($8.3 billion) is a far cry from the Rs 1,00,000 crore ($13.1 billion) mark it breached on the day it went public last year.
