HSBC On Zomato and Quick Commerce Hyperlocal Framework IV - Deep

Downloaded from Capital IQ by Karthik Rajagopal (karthik.rajagopal@spglobal.com) at S&P Global Market Intelligence Inc.
on Saturday Apr 20 2024 06:04:40 AM,

Sessionid:ory4mnpfgwcbzlct2nni00aq
9 April 2024
Equities
Quick commerce Internet Software & Services
Hyperlocal Framework (IV) – Deep-dive into QC

India
business with Zepto
◆ Zepto sees clear roadmap to improve EBITDA margins to high Yogesh Aggarwal*
Head of Research, India
single digits in the next 3-4 years HSBC Securities and Capital Markets (India) Private Limited
yogeshaggarwal@hsbc.co.in
◆ QC offers most benefits of unorganised retail with better service +91 22 2268 1246
and hence should continue to gain share of the retail spend Prateek Maheshwari*, CFA
Analyst, Cement and Automotive
HSBC Securities and Capital Markets (India) Private Limited
◆ Runway for growth remains compelling as even now top metros prateek.maheshwari@hsbc.co.in
+9198 1937 0718
are doubling every year; we raise Zomato (Buy) TP to INR215
(from INR200) * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is
not registered/ qualified pursuant to FINRA regulations
We did another deep dive into the quick commerce (QC) business with the management
of Zepto (Aadit Palicha – Co-founder of Zepto and Ramesh Bafna – CFO). Zepto has
been at the forefront of the QC industry in India and continues to grow strongly (+100% y-
o-y at around USD1.2bn GMV run-rate currently). Company data shows it is continuing to
make market share gains as well (exhibit 5), predominantly from Instamart though, as we
believe the GMV of Blinkit (which is owned by Zomato) is likely to nearly double in FY24.
Street optimism around the QC business has improved greatly in recent quarters though
some pockets of concern/uncertainties remain, which we try to address in this note.
What will drive profitability from current levels? Zepto sees a clear road-map to
improve EBITDA margins to high-single-digits in the next 3-4 years. Blinkit’s EBITDA
margins are -2% currently (3Q24) and we expect this to improve to 4-5% in FY27.
According to Zepto, store-level fixed costs are fully optimised beyond 1,400 orders per
day, and there is not much operating leverage at play. However, multiple other levers are
set to drive EBITDA margins going forward. For Zepto, management expects this to be
driven by higher advertising revenues, better take-rates (sourcing leverage and better
mix), reduction in last-mile delivery costs (due to non-ICE vehicles and store densification)
and higher delivery charges. This would mean mature stores EBITDA margins moving
from 4-5% currently to 8-9%. We believe there will be a similar trend for Blinkit (exhibit 1)
as well. In the case of Blinkit there could be some leverage on store-level fixed costs, and
the number of orders per day can still go up, though we believe it is unlikely that Blinkit will
increase its delivery charges.
There are no successful examples of QC business globally. How is India different?
We believe India is likely to graduate directly from unorganised retail (Kirana stores) to
QC, while Modern Retail (MR) penetration will likely remain low (exhibit 7). And at this
stage the majority of value migration is from unorganised retail to QC, in our view.
Importantly, this is driven by the fact that QC imitates most attributes of unorganised retail
in India, unlike MR. For instance, the majority of the grocery spend by Indian consumers
is through small tickets, high frequency purchases, which are suitable for QC format
rather than MR. Plus, most Indian kitchens don’t have the space to store monthly Institutional Investor Survey 2024
groceries, unlike in developed markets. QC also offers the unique proposition of SKUs
2 – 26 April
that are as high as MR, with proximity that is as good as unorganised retail. The number
of SKUs over the past two years has gone up from 2K to 6K in each QC dark store now Click to vote
and Zepto is looking to increase it further to 10-12K.
Disclosures & Disclaimer Issuer of report: HSBC Securities and Capital

Markets (India) Private Limited
This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at:
https://www.research.hsbc.com
For the exclusive use of Karthik Rajagopal (karthik.rajagopal@spglobal.com) at S&P Global Market Intelligence Inc.
Downloaded from Capital IQ by Karthik Rajagopal (karthik.rajagopal@spglobal.com) at S&P Global Market Intelligence Inc. on Saturday Apr 20 2024 06:04:40 AM,
Equities ● Internet Software & Services
9 April 2024
Our past published notes:

◆ Zomato (Buy): Blinkit’s ad-spend outlook, 11 March 2024
◆ Zomato (Buy): 2024 outlook – tough comparables from 2023, 10 January 2024
◆ Zomato (Buy): Hyperlocal economics – III, 29 August 2023
◆ Zomato (Buy): Grocery Hyperlocal Framework II, 6 July 2022
◆ Delhivery: Initiate at Buy-Delivering the goods, 14 June 2022
◆ Zomato (Buy): Grocery hyperlocal framework, 10 June 2022
◆ India NEXT: Next Generation Logistics, India’s Solid E-commerce backbone, 16 November 2021
◆ Zomato: Upgrade to Buy – Time to eat the cake, 24 May 2022
◆ Zomato: Hold – Electrifying food delivery, 29 March 2022
◆ Zomato: Hold – Zomato and Blinkit getting closer, 16 March 2022
◆ Zomato: Upgrade to Hold – Real Opportunity vs Unreal expectations, 16 February 2022
◆ Zomato: Reduce – Zomato’s expansion strategy: an abstract painting, 13 December 2021
◆ Zomato: Reduce – Growth pains, 4 November 2021
◆ India Internet: Hyperlocal Economics, 24 August 2021
◆ Zomato: Initiate at Reduce – Not for the calorie conscious, 4 August 2021
2
9 April 2024
Quick Commerce profitability aspirations remain on track
Exhibit 1: Zepto and Blinkit both are seeing strong improvement in profitability every
quarter
Zepto sees clear road-map to improve CM margins (store level EBITDA) to high single digits in
the next 3-4 years.
Zepto is already doing nearly 1,600 orders per day per store and hence further margin
expansion is not driven by operating leverage but other levers such as higher advertising
revenues, better take-rates (sourcing leverage and better mix), reducing in last mile delivery
cost (due to non-ICE vehicles and store densification) and higher delivery charges.
For Blinkit we continue to expect 4-5% EBITDA range by FY27 as shown below
6%
5%
1.0%
4%
1.0%
3%
1.0% 5.0%
2%
1% 2.5% 2.0%
0%
-1% -2.5%
-2%
-3%
3QFY24 Corporate Ad. Mix Store op. Last mile 5% EBITDA
EBITDA overhead Revenue leverage to GMV
op. leverage
Source: Company data and HSBC estimates
Exhibit 2: Last mile delivery cost has continued to come down for Zepto
With continued increased penetration of non-ICE vehicles and densification of dark stores
delivery cost per order should continue to come down. For Zepto, around 30% of total orders
are already delivered from non-ICE vehicles
Blinkit should be able to follow this trend as well
80
(In INR)
70
60 9
50 9
6 2
40 2
30 67
20 43 39
10
-
Delivery cost
optimisation
Densificatio
Non-ICE
Mar-22
Bicycles &
Mar-23
Incentive
structure
Rate card
Target
Evs
Source: Zepto company data
3
9 April 2024
Store level profitability curve
Exhibit 3: Store-level profitability curve – both fixed cost leverage and variable cost
reduction at play
Fixed costs include rental and other overheads like electricity costs, housekeeping, security,
and managerial staff. Variable costs including picking costs (which has some leverage as well in
the initial ramp-ups) and packaging. We believe that in a steady state (which is volumes of
1,000-1,500 orders per day), fixed operational fixed costs can come down to 2-3% of order
value (AOV). This cost is as high as 30% of order value in the early days of operations for a
dark store
2500 sq ft store with 5-6K SKUs (Metro/Tier 1 city)
Duration (months of operations) 1 6 12 18 24 36
Number of orders per day 100 500 1000 1500 1800 2000
AOV (3) 420 440 460 480 500 550
Commission + ad revenues 20% 20% 20% 21% 23% 24%
Commission + ad revenues 84 88 92 101 115 132
Delivery charges 5 5 12 12 12 12
Total income 89 93 104 113 127 144
Delivery cost 40 38 36 34 32 32
Discounts 40 35 28 22 22 22
Rent 83 17 8 6 5 4
Other DS fixed costs (2) 58 12 6 4 3 3
Picking and packaging cost (1) 25 20 15 15 15 15
Mid-mile + Distribution center costs 40 33 26 19 14 14
Wastage, Damages and Expiry 25 19 13 8 3 3
Store level EBITDA/Contribution margin (223) (80) (28) 5 33 51
Store level EBITDA/Contribution margin as % of AOV -53.0% -18.3% -6.1% 1.1% 6.6% 9.3%
Store level fixed cost as % of AOV 33.7% 6.4% 3.1% 2.0% 1.6% 1.3%
Source: HSBC estimates. Note above figures for AOV, Delivery charges, Commissions, and costs are in INR/order.
(1) Picking cost can come down with operating leverage as well, but we have assumed it flattish (80 orders per day per picker)
(2) Other overheads include electricity costs, housekeeping, security and managerial staff etc.
(3) Mature users end by ordering more items per order and hence higher AOV
Exhibit 4: Zepto has witnessed sharp fall in store cost/order due to operating leverage.
Though beyond 1,300-1,400 orders per day, fixed cost reduction per order is minimal and
further profitability improvement will be driven by other variables like revenues maximisation and
reduction in variable costs
50
(In %)
45 Manpower cost
40
35 15.1 Managerial cost
30 15.5
25
10.0 10.9 Security & Housekeep
20 7.1 10.0
15 4.4
3.1 5.1 4.0 Rent
10 2.2 1.5
10.1 7.7
5 5.9 5.5
3.3 4.6 3.0 3.0
0 Misc. Expenses (electricity, water and
Mar 22 Oct 22 Mar 23 Mar 24 maintenance, etc.)
Source: Zepto data till March 23 and HSBC estimates for March 2024
4
9 April 2024
Zepto continues to gain market share; Blinkit resilient as well
Zepto in less than three years has grown to more than USD1bn GMV and is still growing at
more than 100% y-o-y from the current base. Blinkit remains the market leader with around
USD2bn GMV now, which should double in FY24, in our view. Although there is clearly an
industry tailwind driving this growth, Zepto does believe its gaining market share as well,
predominantly from Swiggy Instamart as shown in the exhibit below.
Importantly, Zepto is operating in only 10 cities, compared to around 25-30 for Blinkit and
Instamart and hence Zepto believes that it is already the second-largest player in metros
(exhibit below). In terms of revenues market share, Zepto’s overall take-rate is around 22-23%
compared to 18-19% for Blinkit and its (Zepto’s) revenue market share is even higher.
Exhibit 5: Zepto has grown strongly since inception and has benefitted from both
industry growth and market share gains
15%
24% 28%
52% 36% 32%
40% 40%
32%
Mar 22 Mar 23 Jan 24

Zomato-Blinkit Swiggy-Instamart Zepto
Source: Zepto data/estimates and HSBC estimates
Exhibit 6: Zepto is now the Number 2 in Metros and has gained significant market share
50%
45%
40% 36% 37% 37%
35% 31% 32%
30% 27%
25%
20%
15%
10%
5%
0%
Zomato-Blinkit Swiggy-Instamart Zepto
Jul 23 Jan 24
Source: Zepto data/estimates and HSBC estimates
5
9 April 2024
Indian grocery migration from unorganised retail to QC
India is likely to graduate directly from unorganised retail (Kirana stores) to QC, while Modern
Retail (MR) penetration may remain lower than most comparable countries. And at this stage
there is no competition between QC and MR in India as the majority of value migration is
coming from unorganised retail to QC, in our view.
Importantly, this is driven by the fact that QC imitates most attributes of unorganised retail in
India, unlike MR. For instance, according to a study from Zepto, the majority of the grocery
spend by Indian consumers is through small tickets, high frequency purchases, which is suitable
for QC format rather than MR. In general, the number of SKUs in an Indian kitchen is far higher
than in the West and hence there is always a need for top-up items, which is better serviced
from local stores than MR.
Moreover, most Indian kitchens don’t have the space to store monthly groceries, unlike in
developed markets. There is less propensity to spend on monthly groceries in one shot and also
customers prefer to buy higher share of fresh food, which is all better suited to QC compared to MR.
QC also offers the unique proposition of a large number of SKUs, as high as MR, with proximity
that is as good as unorganised retail. The number of SKUs has gone up from 2K to 6K in each
QC dark store now and Zepto is looking to increase it further to 10-12K. Expansion of QC in
typical e-com categories such as fashion, electricals, and house-hold consumables will likely
continue to expand the QC TAM as well.
Exhibit 7: Modern retail share of total grocery spend in India remains much lower than
most other large countries and we believe it will likely remain so as customers migrate
from unorganised to QC
100%
9% 8% 10% 9% 14% 11%
90% 4% 17% 12%
14% 5% 11% 1% 2% 6% 33%
80% 5%
50% 56%
70% 58% 57%
65%
60%
3% 74% 68%
50% 94% 92%
3%
87% 85% 80% 85% 87% 1%
40% 78% 78% 82% 0% 12%
30% 64% 3% 2%
0%
20% 42% 42% 47%
32% 32% 26% 30%
10% 2%
0%
6% 6%
0%
FY15 FY23 FY15 FY23 FY15 FY23 FY15 FY23 FY15 FY23 FY15 FY23 FY15 FY23 FY15 FY23 FY15 FY23
United United Germany Japan Türkiye Thailand China Phillipines India
States Kingdom
Modern Trade Online Traditional Trade
Source: Zepto data and HSBC research
6
9 April 2024
Exhibit 8: Indian consumers usually shop through small ticket, high frequency
purchases, which is more suitable to be serviced from QC rather than MR
100% 2% 0% 2% 0%
5% 3%
6% 7% 8%
90% 6% 10% 3% Once in 2+ months
9% 23%
80% Once a month
70% 26%
17%
62% Once in 2 weeks
60% 43% 24%
50% 17% Once a week
40% 34% 2-3 times a week
28%
30% 4-6 times a week
31% 13%
20% 44%
17% 13% Daily
10% 14%
9% 7% 4% 5%
0% 2% 2% 4%
F&V Meat Dairy Staples Packaged foods
Source: Zepto data and HSBC research
7
9 April 2024
Advertising revenues remain the cornerstone of QC long-term

profitability
Overall ad-spend growth: Over the next three years, we believe total advertising spend in
India will grow at least at the nominal GDP growth rate (12%) and hence from the current
USD13bn it could rise to cUSD18bn by FY27.
Share of digital within total: Within this spend, we expect the share of digital to increase from
38% currently to 44% by FY27. Many digital marketers believe this share could go up even
higher (source: IPSOS state of marketing report).
Share of platforms (eg, e-com) within digital spend: The majority of digital spend (80%+) is
distributed across search platforms (like Google), videos (YouTube) and social media (eg,
Facebook, Instagram). Other platforms (like e-com in particular) attract a 15% share of digital
spend. We believe this share will rise from 15% to 18% in FY27. Digital ads on e-com or QC
platforms like Blinkit are a lot more easily tracked compared with other platforms, like social
media, and hence spenders will likely continue to shift their spend in favour of these platforms.
Take-rates of grocery vs non-grocery: Last but not the least – even when compared to e-com
platforms like Flipkart and Amazon, QC is better placed to capture ad-spend due to more
favourable terms of the trade (take-rate) for grocery vs non-grocery. We think advertising take-
rates (terms of the trade) are nearly 6-8% in the case of grocery compared with 1-2% for
electronics, which is a big relative advantage for QC platforms vs other e-com platforms. In
exhibit 9 we compare the marketing and advertising spend comparison of various FMCG
companies in India.
Exhibit 9: Ad spend outlook

Digital ads on e-com or QC platforms like Blinkit are lot more ‘deterministic’ (ie, trackable in
terms of sales) compared to other platforms like social media and hence spenders will continue
to shift their spend in favour of these platforms.
20 18
16
13
12
USDbn
8
8
5
4
0.7 1.4
0.06 0.24
0
Total India Ad spend Digital spend Platform share of total Blinkit ad revenues
Ad spend
FY24e FY27e
Source: IPSOS state of marketing report, HSBC estimates.
8
9 April 2024
Exhibit 10: Changes in estimates for Zomato

______ New Estimates_______ ______ Old Estimates _______ ___ Change in estimates % ___
INR mn FY24e FY25e FY26e FY24e FY25e FY26e FY24e FY25e FY26e
Revenues 120,971 172,771 225,544 120,260 168,306 210,834 1% 3% 7%
EBITDA (742) 8,282 27,058 (798) 7,917 24,783 na 5% 9%
EBIT (5,142) 3,241 21,279 (5,184) 2,967 19,298 na 9% 10%
EPS 0.09 0.87 2.56 0.09 0.85 2.38 5% 3% 8%
Source: HSBC estimates
Our estimate changes are driven by increased order and AoV growth. Moreover, we are
constructive on the Blinkit business and expect positive surprises on GOV growth and
profitability over the coming quarters. We are now factoring in better long-term growth for Blinkit.
Over FY24-37, we now expect order and GoV (gross order value) CAGRs of c28% (previously
25%) and c30% (previously 27%), respectively.
9
9 April 2024
Valuation and risks
Valuation Risks
Current price: We value Zomato using a DCF model, employing a WACC of Downside risks: Growth in FD transacting users may be
Zomato
INR190.50 10.5% based on our assumptions of a risk-free rate of 3.5%, an slower than expected; Zomato’s equity investments in start-
ZOMATO IN inflation differential of 2.0%, a beta of 1.0; a market risk premium of ups may not generate value; and competition in grocery and
Target price:
INR215.00 5.0% (all assumptions are unchanged). Our DCF model also other hyperlocal areas may outperform Zomato and its
incorporates our Blinkit estimates. We believe consensus investee companies such as Blinkit.
Buy Up/downside: (Bloomberg) expectations are realistic at c15% GOV for food
12.86% delivery over the longer term, which, in our view, is achievable.
Moreover, we are constructive on the Blinkit business and expect
positive surprises on GOV growth and profitability over the coming
quarters. We are now factoring in better long-term growth for
Blinkit. Over FY24-37, we now expect order and GOV (gross order
value) CAGRs of c28% (previously 25%) and c30% (previously
27%) respectively. Our target price of INR215.00 (INR200 earlier)
implies c13% upside. We maintain our Buy rating on the stock
owing to continued market share gains in food delivery and further
upside potential from quick commerce.
Yogesh Aggarwal | yogeshaggarwal@hsbc.co.in | +91 22 2268 1246
Priced at 05 Apr 2024

Source: Bloomberg, HSBC estimates
10
9 April 2024
Financials & valuation: Zomato Buy
Financial statements Valuation data

Year to 03/2023a 03/2024e 03/2025e 03/2026e Year to 03/2023a 03/2024e 03/2025e 03/2026e
Profit & loss summary (INRm) EV/sales 22.3 12.9 9.0 6.8
Revenue 69,950 120,971 172,771 225,544 EV/EBITDA nm nm 187.1 56.4
EBITDA -11,913 -742 8,282 27,058 EV/IC 14.9 15.2 15.6 15.8
Depreciation & amortisation -4,369 -4,400 -5,040 -5,779 PE* nm 2131.8 218.6 74.3
Operating profit/EBIT -16,282 -5,142 3,241 21,279 PB 8.7 8.6 8.3 7.5
Net interest 6,328 6,100 6,100 6,200 FCF yield (%) -0.6 0.1 0.6 1.6
PBT -9,955 958 9,341 27,479 Dividend yield (%) 0.0 0.0 0.0 0.0
HSBC PBT -9,955 958 9,341 27,479 * Based on HSBC EPS (diluted)
Taxation 436 -201 -1,962 -5,771
Net profit -9,516 757 7,380 21,708
HSBC net profit -9,515 757 7,380 21,708 ESG metrics
Cash flow summary (INRm) Environmental Indicators 03/2023a Governance Indicators 03/2024a
Cash flow from operations -8,132 5,038 12,865 31,521 GHG emission intensity* 0.5 No. of board members 7
Capex -1,030 -3,629 -3,455 -4,511 Energy intensity* 0.8 Average board tenure (years) 4.0
Cash flow from investment 4,573 7,356 3,045 1,989 CO2 reduction policy Yes Female board members (%) 57.1
Dividends 0 0 0 0
Social Indicators 03/2023a Board members independence (%) 71.4
Change in net debt -26,387 -3,088 -10,548 -24,589
FCF equity -9,162 1,409 9,409 27,010 Employee costs as % of revenues n/a
Balance sheet summary (INRm) Employee turnover (%) 41.4
Diversity policy Yes
Intangible fixed assets 57,071 55,090 53,505 52,237
Tangible fixed assets 6,432 7,642 7,642 7,642 Source: Company data, HSBC
Current assets 108,310 114,673 128,604 156,640 * GHG intensity and energy intensity are measured in kg and kWh respectively against revenue in USD ‘000s
Cash & others 47,031 50,061 60,609 85,198
Total assets 215,987 221,578 233,925 260,693
Operating liabilities 20,115 25,007 29,974 35,034 Issuer information
Gross debt 404 346 346 346 Share price (INR) 190.50 Free float 50%
Net debt -46,627 -49,715 -60,263 -84,852 Target price (INR) 215.00 Sector Internet Software & Services
Shareholders' funds 186,234 186,991 194,370 216,079 RIC (Equity) ZOMT.NS Country/Region India
Invested capital 104,667 102,336 99,168 96,287
Bloomberg (Equity) ZOMATO IN Analyst Yogesh Aggarwal
Market cap (USDm) 19,835 Contact +91 22 2268 1246
Ratio, growth and per share analysis

Year to 03/2023a 03/2024e 03/2025e 03/2026e
Price relative
Y-o-y % change
Revenue 66.8 72.9 42.8 30.5
EBITDA 226.7
Operating profit 556.5 172.00 172.00
PBT 875.1 194.2
HSBC EPS 875.1 194.2 122.00 122.00
Ratios (%)
Revenue/IC (x) 0.8 1.2 1.7 2.3 72.00 72.00
ROIC -15.8 -2.4 3.8 18.2
ROE -5.5 0.4 3.9 10.6 22.00 22.00
ROA -4.7 0.5 3.4 8.9 2022 2023 2024
EBITDA margin -17.0 -0.6 4.8 12.0 Zomato Rel to BOMBAY SE SENSITIVE INDEX
Operating profit margin -23.3 -4.3 1.9 9.4
EBITDA/net interest (x) 1.9 0.1 Source: HSBC
Net debt/equity -25.0 -26.6 -31.0 -39.3 Note: Priced at close of 05 Apr 2024
Net debt/EBITDA (x) 3.9 67.0 -7.3 -3.1
CF from operations/net debt
Per share data (INR)
EPS Rep (diluted) -1.12 0.09 0.87 2.56
HSBC EPS (diluted) -1.12 0.09 0.87 2.56
DPS 0.00 0.00 0.00 0.00
Book value 21.99 22.08 22.95 25.51
11
9 April 2024
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Yogesh Aggarwal and Prateek Maheshwari, CFA
Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stock should
depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that
investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or
relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in
each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating
because research reports contain more complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis:
The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12
months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will
be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a
Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between
5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20%
below the current share price, the stock will be classified as a Reduce.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change
in target price or estimates).
Upside/Downside is the percentage difference between the target price and the share price.
Prior to this date, HSBC’s rating structure was applied on the following basis:
For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,
regional market established by our strategy team. The target price for a stock represented the value the analyst expected the
stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight,
the potential return, which equals the percentage difference between the current share price and the target price, including the
forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12
months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was
expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage
points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months
(unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which
we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's
average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however,
volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
12
9 April 2024
Rating distribution for long-term investment opportunities

As of 31 December 2023, the distribution of all independent ratings published by HSBC is as follows:
Buy 58% (13% of these provided with Investment Banking Services in the past 12 months)
Hold 36% (13% of these provided with Investment Banking Services in the past 12 months)
Sell 6% (9% of these provided with Investment Banking Services in the past 12 months)
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating
models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold
= Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at
http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
Share price and rating changes for long-term investment opportunities

Zomato (ZOMT.NS) share price performance INR Vs Rating & target price history
HSBC rating history
From To Date Analyst
N/A Reduce 03 Aug 2021 Yogesh Aggarwal
Reduce Hold 15 Feb 2022 Yogesh Aggarwal
Hold Buy 23 May 2022 Yogesh Aggarwal
181
Target price Value Date Analyst
161
Price 1 112.00 03 Aug 2021 Yogesh Aggarwal
141 Price 2 92.00 15 Feb 2022 Yogesh Aggarwal
121 Price 3 85.00 23 May 2022 Yogesh Aggarwal
Price 4 90.00 11 Nov 2022 Yogesh Aggarwal
101
Price 5 87.00 16 Jan 2023 Yogesh Aggarwal
81 Price 6 88.00 19 May 2023 Yogesh Aggarwal
61 Price 7 93.00 05 Jul 2023 Yogesh Aggarwal
Price 8 102.00 03 Aug 2023 Yogesh Aggarwal
41 Price 9 120.00 29 Aug 2023 Yogesh Aggarwal
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Apr-24
Price 10 140.00 03 Nov 2023 Yogesh Aggarwal

Price 11 150.00 10 Jan 2024 Yogesh Aggarwal
Source: HSBC Price 12 163.00 08 Feb 2024 Yogesh Aggarwal
Price 13 200.00 11 Mar 2024 Yogesh Aggarwal
Source: HSBC
To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please
use the following links to access the disclosure page:
Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures
All other clients: www.research.hsbc.com/A/Disclosures
HSBC & Analyst disclosures

Disclosure checklist
Company Ticker Recent price Price date Disclosure
ZOMATO ZOMT.NS 191.80 08 Apr 2024 7
Source: HSBC
1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months.
2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3
months.
3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company.
4 As of 29 February 2024, HSBC beneficially owned 1% or more of a class of common equity securities of this company.
5 As of 29 February 2024, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of investment banking services.
and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
and/or paid compensation to HSBC in respect of non-securities services.
13
9 April 2024
8 A covering analyst/s has received compensation from this company in the past 12 months.
9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company.
12 As of 03 April 2024, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share
capital, calculated according to the SSR methodology.
13 As of 03 April 2024, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share
capital, calculated according to the SSR methodology.
14 HSBC Qianhai Securities Limited holds 1% or more of a class of common equity securities of this company.
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt
(including derivatives) of companies covered in HSBC Research on a principal or agency basis or act as a market maker or
liquidity provider in the securities/instruments mentioned in this report.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking,
sales & trading, and principal trading revenues.
Whether, or in what time frame, an update of this analysis will be published is not determined in advance.
Non-U.S. analysts may not be associated persons of HSBC Securities (USA) Inc, and therefore may not be subject to FINRA
Rule 2241 or FINRA Rule 2242 restrictions on communications with the subject company, public appearances and trading
securities held by the analysts.
Economic sanctions laws imposed by certain jurisdictions such as the US, the EU, the UK, and others, may prohibit persons
subject to those laws from making certain types of investments, including by transacting or dealing in securities of particular
issuers, sectors, or regions. This report does not constitute advice in relation to any such laws and should not be construed as an
inducement to transact in securities in breach of such laws.
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company
available at www.hsbcnet.com/research. HSBC Private Banking clients should contact their Relationship Manager for queries
regarding other research reports. In order to find out more about the proprietary models used to produce this report, please contact
the authoring analyst.
Additional disclosures
1 This report is dated as at 09 April 2024.
2 All market data included in this report are dated as at close 05 April 2024, unless a different date and/or a specific time of
day is indicated in the report.
3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of
Research operate and have a management reporting line independent of HSBC's Investment Banking business.
Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses
to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
4 You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest
payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the
price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument,
and/or (iii) measuring the performance of a financial instrument or of an investment fund.
Production & distribution disclosures

1. This report was produced and signed off by the author on 09 Apr 2024 01:05 GMT.
2. In order to see when this report was first disseminated please see the disclosure page available at
https://www.research.hsbc.com/R/34/TwmsCJt
14
9 April 2024
Disclaimer
Legal entities as at 29 March 2024: Issuer of report
HSBC Bank plc; HSBC Continental Europe; HSBC Continental Europe SA, Germany; HSBC Bank Middle East Limited, DIFC HSBC Securities and Capital Markets (India) Private
; HSBC Bank Middle East Limited, UAE branch; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC Securities (South Africa) Limited
(Pty) Ltd, Johannesburg; The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; The Hongkong and Registered Office
Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, 52/60 Mahatma Gandhi Road
Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Qianhai Fort, Mumbai 400 001, India
Securities Limited; HSBC Securities (Taiwan) Corporation Limited; HSBC Securities and Capital Markets (India) Private Telephone: +91 22 2267 4921
Limited, Mumbai; HSBC Bank Australia Limited; HSBC Securities (USA) Inc., New York; HSBC México, SA, Institución de Fax: +91 22 2263 1983
Banca Múltiple, Grupo Financiero HSBC; Banco HSBC SA; HSBC Bank Argentina SA Website: www.research.hsbc.com
SEBI Reg. No. INH000001287
CIN: U67120MH1994PTC081575
This document has been issued by HSBC Securities and Capital Markets (India) Private Limited ("HSBC") for the information of its customers only. HSBC Securities and Capital Markets (India)
Private Limited is registered as "Research Analyst" (Reg. No. INH000001287), Merchant Banker (Reg. No. INM000010353) and Stock Broker (Uniform Reg. No. INZ000234533) and regulated by
the Securities and Exchange Board of India. If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient
and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document
on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or
liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. From time to time research analysts
conduct site visits of covered issuers. HSBC policies prohibit research analysts from accepting payment or reimbursement for travel expenses from the issuer for such visits. HSBC and its affiliates
and/or their officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any
such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in
related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those
companies and may also be represented in the supervisory board or any other committee of those companies. Details of Associates may be obtained from or for any Grievances on the report
published by HSBC Securities and Capital Markets (India) Private Limited may be reported to Compliance Officer: Mudit Tayal, Email: mudit.tayal@hsbc.co.in The information and opinions
contained within the research reports are based upon publicly available information and rates of taxation applicable at the time of publication which are subject to change from time to time. Past
performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Where an
investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price or
income of that investment. In case of investments for which there is no recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or
the extent of the risk to which it is exposed. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to
Investments in securities markets are subject to market risks. Read all the related documents carefully before
investors.
investing . The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact a HSBC Group member in your home jurisdiction if you wish
to use HSBC Group services in effecting a transaction in any investment mentioned in this document.
In the UK, this publication is distributed by HSBC Bank plc for the information of its Clients (as defined in the Rules of FCA) and those of its affiliates only. Nothing herein excludes or restricts any
duty or liability to a customer which HSBC Bank plc has under the Financial Services and Markets Act 2000 or under the Rules of FCA and PRA. A recipient who chooses to deal with any person
who is not a representative of HSBC Bank plc in the UK will not enjoy the protections afforded by the UK regulatory regime. HSBC Bank plc is regulated by the Financial Conduct Authority and the
Prudential Regulation Authority.
In the European Economic Area, this publication has been distributed by HSBC Continental Europe or by such other HSBC affiliate from which the recipient receives relevant services.
In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. In Hong Kong, this document has been distributed by The Hongkong and Shanghai Banking Corporation Limited
in the conduct of its Hong Kong regulated business for the information of its institutional and professional customers; it is not intended for and should not be distributed to retail customers in Hong
Kong. The Hongkong and Shanghai Banking Corporation Limited makes no representations that the products or services mentioned in this document are available to persons in Hong Kong or are
necessarily suitable for any particular person or appropriate in accordance with local law. All inquiries by such recipients must be directed to The Hongkong and Shanghai Banking Corporation
Limited. In Korea, this publication is distributed by either The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") or The Hongkong and Shanghai
Banking Corporation Limited, Seoul Branch ("HBAP SEL") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act
("FSCMA"). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. Both HBAP SLS and HBAP SEL are regulated by
the Financial Services Commission and the Financial Supervisory Service of Korea. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited,
Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) ("SFA") and accredited
investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. Only Economics or Currencies reports are intended for distribution to a person who is
not an Accredited Investor, Expert Investor or Institutional Investor as defined in SFA. The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch accepts legal responsibility for
the contents of reports. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking
Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited,
Singapore Branch" representative in respect of any matters arising from, or in connection with this report. Please refer to The Hongkong and Shanghai Banking Corporation Limited Singapore
Branch's website at www.business.hsbc.com.sg for contact details. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117
925 970, AFSL 301737) for the general information of its "wholesale" customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by
HSBC Bank Australia Limited (ABN 48 006 434 162, AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available
to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives,
financial situation or particular needs of any recipient.
HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. The information contained herein is under no circumstances to be
construed as investment advice and is not tailored to the needs of the recipient. All US persons receiving and/or accessing this report and wishing to effect transactions in any security discussed
herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. HSBC México, S.A., Institución de Banca Múltiple, Grupo
Financiero HSBC is authorized and regulated by Secretaría de Hacienda y Crédito Público and Comisión Nacional Bancaria y de Valores (CNBV). In Brazil, this document has been distributed by
Banco HSBC SA ("HSBC Brazil"), and/or its affiliates. As required by Resolution No. 20/2021 of the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários), potential
conflicts of interest concerning (i) HSBC Brazil and/or its affiliates; and (ii) the analyst(s) responsible for authoring this report are stated on the chart above labelled "HSBC & Analyst Disclosures".
If you are a customer of HSBC Wealth & Personal Banking ("WPB"), including Global Private Banking, you are eligible to receive this publication only if: (i) you have been approved to receive
relevant research publications by an applicable HSBC legal entity; (ii) you have agreed to the applicable HSBC entity's terms and conditions and/or customer declaration for accessing research;
and (iii) you have agreed to the terms and conditions of any other internet banking, online banking, mobile banking and/or investment services offered by that HSBC entity, through which you will
access research publications (collectively with (ii), the "Terms"). If you do not meet the above eligibility requirements, please disregard this publication and, if you are a WPB customer, please
notify your Relationship Manager or call the relevant customer hotline. Distribution of this publication is the sole responsibility of the HSBC entity with whom you have agreed the Terms. Receipt
of research publications is strictly subject to the Terms and any other conditions or disclaimers applicable to the provision of the publications that may be advised by WPB.
© Copyright 2024, HSBC Securities and Capital Markets (India) Private Limited, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted,
on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Securities and Capital Markets (India) Private Limited.
MCI (P) 061/09/2023, MCI (P) 073/10/2023, MCI (P) 007/10/2023, MCI (P) 008/01/2024
[1233268]
15
Global Telecoms, Media & Technology

Research Team
Asia Analyst
Europe
Ted Lin +8862 6631 2870
Global Head of Communications Equity Head of Telecoms Research, Asia Pacific ted.ht.lin@hsbc.com.tw
Research Neale Anderson +852 2996 6716
Nicolas Cote-Colisson +44 20 7991 6826 neale.anderson@hsbc.com.hk Associate
nicolas.cote-colisson@hsbcib.com Hankil Chang +822 3706 8750
Head of Technology Research, Asia Pacific han.kil.chang@kr.hsbc.com
Frank Lee +852 2996 6916
Senior Analyst, Telecoms Services & Associate
frank.lee@hsbc.com.hk
Infrastructure Min Seok Shim +822 3706 8704
Luigi Minerva +44 20 7991 6928 Head of Internet and Gaming Research, Asia min.seok.shim@kr.hsbc.com
luigi.minerva@hsbcib.com Pacific
Charlene Liu +65 6658 0615
Analyst Americas
charlene.r.liu@hsbc.com.sg
Adam Fox-Rumley, CFA +44 20 7991 6819 Analyst
adam.fox-rumley@hsbcib.com Head of Research, India Phani Kanumuri +52 55 855 1235
Yogesh Aggarwal +91 22 2268 1246 phani.kanumuri@hsbc.com.mx
Analyst yogeshaggarwal@hsbc.co.in
Antonin Baudry +33 1 56 52 43 25 Head of Research, Korea
antonin.baudry@hsbc.com Ricky Seo +822 37068777 Specialist Sales
rickyjuilseo@kr.hsbc.com
Analyst
Adithya Metuku +44 20 3268 2960 Head of ASEAN Internet and Telecoms James Britton +44 207 991 5503
adithya.metuku@hsbc.com Piyush Choudhary, CFA +65 6658 0607 james1.britton@hsbc.com
piyush.choudhary@hsbc.com.sg
Analyst
Christopher Johnen +49 211 910 2949 Analyst, Korea EV Battery, Autos and
christopher.johnen@hsbc.de Technology
Will Cho +822 3706 8765
will.cho@kr.hsbc.com
EEMEA & LatAm
Analyst
Analyst Carol Juan +886 2 6631 2862
Madhvendra Singh, CFA +971 4 509 3348 carol.cc.juan@hsbc.com.tw
madhvendra.singh@hsbc.com
Analyst
Analyst Edison Hsia +886 2 6631 2868
Ankur P Agarwal, CFA +971 4 423 6558 edison.yp.hsia@hsbc.com.tw
ankurpagarwal@hsbc.com
Analyst
Rishabh Dhancholia +91 80 3001 2841
rishabh.dhancholia@hsbc.co.in
Analyst, Internet Research
Carson Lo, CFA +852 2822 4337
carson.lo@hsbc.com.hk
Analyst
Junhyun Kim +822 3706 8763
junhyun.kim@kr.hsbc.com
Analyst
Wern Juan CHNG +65 6658 0614
wernjuan.chng@hsbc.com.sg
Analyst
Charlotte Wei +852 2996 6539
charlotte.wei@hsbc.com.hk
Analyst
Ritchie Sun, CFA +852 28224392
ritchie.k.h.sun@hsbc.com.hk
Analyst
Peishan Wang +852 3941 7008
peishan.wang@hsbc.com.hk
Analyst
Christina Chen, CFA +852 2822 2912
christina.z.chen@hsbc.com.hk
Associate
James Lam +852 2288 9130
james.s.h.lam@hsbc.com.hk

HSBC On Zomato and Quick Commerce Hyperlocal Framework IV - Deep

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

HSBC On Zomato and Quick Commerce Hyperlocal Framework IV - Deep

Uploaded by

Copyright:

Available Formats

Downloaded from Capital IQ by Karthik Rajagopal (karthik.rajagopal@spglobal.com) at S&P Global Market Intelligence Inc.

on Saturday Apr 20 2024 06:04:40 AM,

Hyperlocal Framework (IV) – Deep-dive into QC

Disclosures & Disclaimer Issuer of report: HSBC Securities and Capital

Our past published notes:

Quick Commerce profitability aspirations remain on track

Source: Zepto company data

Store level profitability curve

Zepto continues to gain market share; Blinkit resilient as well

52% 36% 32%

Mar 22 Mar 23 Jan 24

Indian grocery migration from unorganised retail to QC

Source: Zepto data and HSBC research

Advertising revenues remain the cornerstone of QC long-term

Exhibit 9: Ad spend outlook

Exhibit 10: Changes in estimates for Zomato

Valuation and risks

Yogesh Aggarwal | yogeshaggarwal@hsbc.co.in | +91 22 2268 1246

Priced at 05 Apr 2024

Financials & valuation: Zomato Buy

Financial statements Valuation data

Ratio, growth and per share analysis

Rating distribution for long-term investment opportunities

Share price and rating changes for long-term investment opportunities

Price 10 140.00 03 Nov 2023 Yogesh Aggarwal

Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures

All other clients: www.research.hsbc.com/A/Disclosures

HSBC & Analyst disclosures

Production & distribution disclosures

Global Telecoms, Media & Technology

You might also like