Zomato had many positives in Q2. A fundraising plan overshadowed them all.

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Subscribe to enjoy similar stories. Zomato Ltd’s September quarter (Q2FY25) result was decent. A key parameter – the gross order value (GOV) – of food delivery and Blinkit grew by 21% and 122% year-on-year, respectively.

Growth rates are in line with management’s guidance. The company needs an average GOV of ₹7 lakh a day per store to achieve breakeven. It’s currently at ₹9.81 lakh, up 30% year-on-year, management said.

While the contribution margin (revenue minus variable costs) rose sequentially for food delivery, from 7.3% to 7.6%, it declined from 4% to 3.8% for quick commerce. This is the first time the quick commerce business has seen a sequential decline in the contribution margin. It remains to be seen whether this was because of the strategy of waiving delivery charges or offering promotional incentives by new stores.

Right now, though, the Street is more intrigued by the board’s approval of a sudden ₹8,500-crore fundraising plan. Since Zomato has a market capitalisation of ₹2.2 trillion, the equity dilution could be about 4%. For now, there is limited clarity on how the company plans to use these funds.

In the earnings call, management only said that funds were needed to strengthen the balance sheet, though it did rule out using the cash for discounts to gain customers in quick commerce. Also read: Sector pangs hurt UltraTech, drive downgrades The news comes as competitor Swiggy also looks to raise funds and competition in the quick commerce space heats up. Swiggy’s draft red herring prospectus showed it had investments worth ₹2,918 crore and ₹837 crore in cash equivalents of Q1FY25.