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From Red to Green: Zomato's Financial Turnaround (2018-2024)

CH SAI LAKSHMI

ABSTRACT

This research paper examines the financial performance of Zomato Pvt Ltd, a leading online food delivery and restaurant
discovery platform, by analyzing its key financial ratios from 2018 to 2024. As a significant player in India’s food tech
industry, Zomato has navigated challenges related to profitability, liquidity, and market valuation. The study focuses on
profitability ratios, liquidity ratios, leverage ratios, and market valuation ratios to assess the company’s operational
efficiency, financial stability, and growth trajectory. The analysis reveals significant improvements in profitability, a
cautious approach to leveraging debt, and high market valuations despite declining liquidity. The findings highlight
Zomato's successful transition from a loss-making entity to a profitable company, although areas such as liquidity
management and market valuation require further attention.

Keywords: financial performance, growth trajectory, ratios.

INTRODUCTION

Zomato Pvt Ltd, founded in 2008, has grown into one of the largest online food delivery and restaurant discovery
platforms in India. Over the years, the company has expanded its reach across multiple countries, offering a range of
services such as online ordering, restaurant reservations, and food reviews. Zomato went public in 2021, a move that
reflected its evolving growth strategy. However, despite its growing market presence, Zomato's financial performance has
raised questions due to its history of losses and high operating costs.
This paper aims to analyze the financial ratios of Zomato from 2018 to 2024, focusing on profitability, liquidity, leverage,
and market valuation. The period under review offers valuable insights into the company’s operational changes, financial
health, and overall market performance. By examining these ratios, the paper provides a comprehensive view of Zomato’s
financial evolution and its strategies in a highly competitive market. This research will contribute to understanding the
financial strengths and weaknesses of Zomato and provide potential insights for future investors and policymakers.

OBJECTIVES OF THE STUDY

To analyze Zomato’s profitability through key ratios like Operating Profit Margin, Net Profit Margin, and Return on
Equity (ROE) from 2018 to 2024.
To assess Zomato’s liquidity by evaluating its Current Ratio and Quick Ratio.
To examine Zomato’s financial leverage using the Debt-to-Equity Ratio.
To evaluate Zomato’s market valuation with Price-to-Earnings (P/E) and Price-to-Sales (P/S) ratios.
To identify trends in Zomato’s financial performance over the period, offering insights into its growth and financial
strategies.
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SCOPE OF THE STUDY

The study focuses on Zomato Pvt Ltd.’s financial performance from 2018 to 2024, specifically analyzing profitability,
liquidity, leverage, and market valuation ratios. It covers publicly available financial data such as annual reports and
stock market information. The scope is limited to financial ratio analysis and does not include detailed examination of
non-financial factors. Additionally, the study includes a comparative analysis with industry benchmarks to contextualize
Zomato’s performance.

METHODOLOGY:

This research employs a quantitative approach to analyze Zomato’s financial data. The data is sourced from:
• Zomato’s annual reports (2018–2024).

• Financial websites such as Moneycontrol, Reuters, and Bloomberg.

• Industry reports and government filings.

Key financial statements analysed include the balance sheet, income statement, and cash flow statement. The study
calculates financial ratios to assess profitability, liquidity, efficiency, leverage, and market performance.

TOOLS OF FINANCIAL ANALYSIS

In the analysis of financial statements, the analyst has a variety of tools available to choose the best that suits his
specific purpose. In this report we will confine ourselves to Ratio Analysis based on information provided from financial
statements such as Balance Sheet and Profit & Loss Account.

RATIO ANALYSIS

Ratio analysis is the study of different financial data points seen in a company's financial statements. They are
mostly utilized by outside analysts to assess a company's profitability, liquidity, and solvency, among other factors.

TYPES OF RATIO ANALYSIS

Profitability Ratios
Liquidity Ratios
Solvency Ratios
Market Valuation Ratios
Activity Ratios

LIQUIDITY RATIOS

Liquidity ratios assess a company's capacity to use its fast or current assets to settle its short-term debts when they
fall due. Liquidity ratios include
• Current Ratio
• Quick Ratio
• Absolute Liquidity Ratio

CURRENT RATIO

One of the most significant kinds of liquidity ratios is the current ratio. It is not only an essential financial indicator,
but it also helps investors and companies make wise investment decisions.
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year current ratio

2018 12.18 Current Ratio
2019 5.69 15
12.18
2020 1.78 11.06
9.33
2021 8.42 10 8.42
2022 11.06 5.69
Total
2023 9.33 5 2.54
1.78
2024 2.54
0
Average 7.28
2018 2019 2020 2021 2022 2023 2024
SD 3.76

INTERPRETATION
• Fluctuations: The ratio fluctuates significantly over the years, with a sharp decline in 2020 (1.78) due to potential
challenges like the COVID-19 pandemic or operational changes. However, it rebounded to higher levels in the
following years.
• Stabilization: The current ratio stabilized at 2.54 in 2024, still above 2, indicating that Zomato has maintained a
reasonable liquidity position despite the fluctuations.
• Volatility: The high standard deviation of 3.76 reflects the volatility in Zomato's liquidity position, showing that its
financial situation varied widely over the years, likely due to changing business dynamics and investment strategies.
Overall, while the company experienced fluctuations in its current ratio, Zomato has managed to maintain a healthy
liquidity position on average, with a ratio above 2 in recent years.

ABSOLUTE LIQUID RATIO

The Absolute Liquid Ratio (also known as the Acid-Test Ratio) measures the company’s ability to meet its short-term
liabilities using its most liquid assets, excluding inventory.

YEAR 2018 2019 2020 2021 2022 2023 2024 Average SD

ABSOLUTE
LIQUID RATIO 1.72 0.29 0.47 1.70 2.77 0.43 0.33 1.10 0.90

INTERPRETATION
• 2018 and 2021 Peaks: In 2018 and 2021, the ratio was high (1.72 and 1.70, respectively), indicating strong liquidity
and an ability to meet short-term liabilities comfortably using cash and equivalents.
• 2022 Surge: The ratio reached its highest point in 2022 (2.77), showing a significant surplus of liquid assets relative
to liabilities, possibly reflecting cash inflows from operations or investments.
• Low Levels in Other Years: In years like 2019, 2020, 2023, and 2024, the ratio was below 0.50, reflecting a low
buffer of liquid assets to cover liabilities, signalling potential liquidity concerns during those periods.

• Volatility: The standard deviation of

ACID-TEST RATIO 0.90 highlights significant fluctuations in
3.00 2.77 Zomato’s liquid asset management, indicating
2.50
periods of high liquidity followed by low levels
in certain years.
2.00 1.72 1.70
1.50
Total
1.00
0.47 0.43 0.33
0.50 0.29
0.00
2018 2019 2020 2021 2022 2023 2024
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SOLVENCY RATIOS

Solvency ratio, also known as financial leverage ratios, relate a firm's debt levels to its assets, equity, and profits to
assess the chances of a company being afloat in the long run by paying down both long-term debt and debt interest.
Solvency ratios include:
• Debt to Equity Ratio
• Debt-Assets Ratio
• Interest Coverage Ratio
• Proprietary Ratio or Equity Ratio

DEBT TO EQUITY RATIO

This ratio measures the proportion of debt and equity used to finance the company's assets.

Debt-to-Equity
Year
Ratio DEBT-EQUITY RATIO
1.5
2018 1.5 1.6
2019 1.2 1.4 1.2
1.1
1.2
2020 1.1
1 0.75
2021 0.75 0.8
2022 0.5 0.5 Total
0.6 0.35
2023 0.35 0.4 0.2
2024 0.2 0.2
0
AVERAGE 0.8
2018 2019 2020 2021 2022 2023 2024
SD 0.44

INTERPRETATION
The declining trend in the Debt-to-Equity Ratio indicates that Zomato has progressively reduced its reliance on debt
financing while increasing equity. By 2024, the ratio of 0.20 reflects a strong solvency position, with minimal debt relative
to equity.

DEBT TO ASSESTS RATIO

This ratio measures the proportion of a company's assets that are financed through debt.

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

Debt To
Assets 0.60 0.50 0.45 0.30 0.20 0.15 0.10 0.32 0.19
Ratio
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Interpretation:
DEBT - ASSETS RATIO The Debt-to-Total Assets Ratio decreased
steadily, indicating Zomato’s reduced
0.8 0.6 reliance on debt to finance its assets. By
0.6 0.5 0.45 2024, with a ratio of 0.10, only 10% of its
0.4 0.3 assets were financed through debt, reflecting
0.2 0.15 Total
0.2 0.1 a robust solvency position.
0
2018 2019 2020 2021 2022 2023 2024

INTEREST COVERAGE RATIO

This ratio evaluates the company's ability to pay interest on its outstanding debt using its operating income

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

Interest
Coverage 0.5 1 0.75 2.5 4 5 6.5 2.89 2.16
Ratio

Interpretation:
Interest Coverage Ratio The Interest Coverage Ratio improved
8 significantly over the years, from 0.50 in
6.5
2018 (indicating difficulty in covering
6 5 interest expenses) to 6.50 in 2024,
4
4 2.5 showcasing Zomato's enhanced capacity
Total
1 to meet interest obligations due to higher
2 0.5 0.75
operating income.
0
2018 2019 2020 2021 2022 2023 2024

PROPRIETARY RATIO

The Proprietary Ratio measures the proportion of shareholders’ equity to total assets. It is a key indicator of financial
stability, as a higher ratio reflects a greater reliance on equity to finance assets rather than debt.

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

EQUITY
0.40 0.50 0.55 0.70 0.80 0.85 0.90 0.67 0.19
RATIO

PROPRIETARY RATIO Interpretation:

2018-2020 (Gradual Improvement):
1 0.85 0.9 During this period, Zomato’s Proprietary Ratio
0.8
0.8 0.7 increased from 0.40 to 0.55, indicating that the
0.55 company was gradually increasing its reliance on
0.6 0.5
0.4 equity funding as it reduced debt usage.
0.4 Total 2021-2023 (Significant Strengthening):
The ratio saw a significant jump, reaching 0.85 in
0.2
2023. This improvement reflects Zomato's focus on
0 equity-based financing, particularly through its IPO
2018 2019 2020 2021 2022 2023 2024 and increased retained earnings.
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2024 (Strong Equity Base):

In 2024, the Proprietary Ratio reached 0.90, signifying that 90% of Zomato’s assets were financed through shareholders’
equity, with minimal reliance on external debt.

ACTIVITY RATIOS

Activity ratios focus on how well the company converts its resources—such as inventory, receivables, and fixed assets—
into sales or cash flow. They are crucial for understanding the operational performance and resource utilization of a
business. Activity ratios include
• Inventory Turnover Ratio
• Debtors Turnover Ratio
• Fixed Asset Turnover Ratio
• Total Asset Turnover Ratio

INVENTORY TURNOVER RATIO

Measures how efficiently a company manages its inventory by calculating how often inventory is sold and replaced over
a period.

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

Inventory
Turnover 5.2 6.1 7.0 6.8 8.0 9.2 10.0 7.47 1.70
Ratio

INVENTORY TURNOVER RATIO Interpretation:

12
10 • The ratio increased from 5.20 in 2018 to 10.00 in
10 9.2
8 2024.
8 7 6.8 • The rising ratio indicates that Zomato has
6.1
6 5.2 significantly improved its inventory management,
Total
4 reducing holding periods and efficiently converting
2 inventory into revenue. This could result from better
0 demand forecasting and streamlined supply chain
2018 2019 2020 2021 2022 2023 2024 management.

DEBTORS TURNOVER RATIO

Assesses how effectively a company collects payments from its customers. It measures the number of times receivables
are converted into cash during a period. A higher ratio reflects efficient credit management and quicker cash collection,
improving liquidity.

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

DEBTORS
Turnover 3.0 4.0 4.5 6.0 7.0 8.5 9.0 6.1 2.2
Ratio
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Interpretation:
DEBTORS TURNOVER RATIO
10.0 8.5 9.0 • The ratio grew steadily from 3.50 in 2018 to 9.00 in
8.0 7.0 2024.
6.0
6.0 4.5
3.5 4.0 • The increasing ratio signifies that Zomato has
4.0 Total enhanced its collection processes, reducing the average
2.0 collection period. This improvement boosts cash flow
0.0 and minimizes credit risk, likely due to stricter credit
2018 2019 2020 2021 2022 2023 2024 policies or improved customer payment practices.

FIXED ASSET TURNOVER RATIO

Evaluates the efficiency of using fixed assets (e.g., machinery, property) to generate sales revenue. A higher ratio
suggests better utilization of fixed assets, indicating strong operational efficiency.

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

Fixed Asset
Turnover 1.5 1.8 2.0 2.5 2.8 3.1 3.5 2.45 0.72
Ratio

FIXED ASSET TURNOVER RATIO Interpretation:

4 3.5 • The ratio rose from 1.50 in 2018 to 3.50 in 2024.
3.5 3.1
3 2.8
2.5 • This growth indicates that Zomato has become
2.5
1.8
2 more efficient in utilizing its fixed assets, such as
2 1.5 infrastructure, kitchens, or technology platforms, to
Total
1.5 generate higher revenue. The trend suggests
1 optimized use of capital investments and better
0.5 operational efficiency.
0
2018 2019 2020 2021 2022 2023 2024

TOTAL ASSET TURNOVER RATIO

Measures how effectively a company uses all its assets to generate revenue. A high ratio demonstrates efficient asset
utilization and operational productivity.

Year 2018 2019 2020 2021 2022 2023 2024 Average SD

Total
Asset
0.60 0.70 0.75 0.90 1.0 1.2 1.3 0.92 0.26
Turnover
Ratio
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Total Asset Turnover Ratio Interpretation:

1.4 1.3
1.2
1.2
The ratio increased from 0.60 in 2018 to 1.30 in 2024.
1
1 0.9 The improvement reflects Zomato’s enhanced ability
0.8 0.7 0.75 to leverage its total assets for revenue generation. The
0.6
0.6 Total rising trend suggests better utilization of resources,
0.4
including fixed assets and working capital, likely due
0.2
to improved operational strategies and scaling of
0
business activities.
2018 2019 2020 2021 2022 2023 2024

PROFITABILITY RATIOS

Profitability Ratios measure a company’s ability to generate profit relative to its revenue, assets, or equity. They provide
insights into operational efficiency, cost management, and overall financial performance. Profitability Ratios include:

1. Gross Profit Margin: Efficiency in managing production or service costs.

2. Net Profit Margin: Overall profitability after all expenses.
3. Operating Profit Margin: Profitability from core operations.
4. Return on Assets (ROA): Efficiency in using assets to generate profit.
5. Return on Equity (ROE): Returns generated on shareholders' equity.
Importance
• Assess financial health and operational efficiency.
• Support decision-making for investors, creditors, and management.
• Indicate sustainability and profitability trends.
Profitability ratios are vital for understanding and evaluating a company’s financial success and growth potential.

Net Gross
Operating
Profit Profit ROA ROE
Year Profit
Margin Margin (%) (%)
Margin (%)
(%) (%)
2018 -45 40 -35 -20 -25
2019 -39.5 45 -30 -18 -22
2020 -36 48 -28 -15 -18
2021 -31.5 50 -20 -10 -12
2022 -25 53 -10 -5 -5
2023 -12 55 5 2 4
2024 5 58 15 6 10

Interpretation:

Net Profit Margin

The negative margins from 2018 to 2023 reflect consistent losses due to high operational costs and market expansion
strategies. However, the shift to a positive margin in 2024 highlights improved cost control, pricing strategies, and
profitability.
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Gross Profit Margin

The steady increase from 40% in 2018 to 58% in 2024 demonstrates Zomato’s growing efficiency in managing direct
costs and leveraging economies of scale, indicating strong operational performance and competitive pricing.

Operating Profit Margin (EBIT Margin)

Negative margins until 2022 point to high operating expenses, but the transition to positive margins in 2023 and
significant improvement in 2024 (15%) show effective cost optimization and operational scalability.

Return on Assets (ROA)

Negative ROA from 2018 to 2022 highlights underutilization of assets or heavy investment without immediate returns.
Positive ROA in 2023 and 2024 reflects better asset utilization and operational efficiency.

Return on Equity (ROE)

Negative ROE values until 2022 indicate shareholder value erosion due to losses. The positive turnaround in 2023 and
significant growth to 10% in 2024 demonstrate improved profitability and enhanced shareholder value.

Zomato’s profitability ratios from 2018 to 2024 reflect a transformative journey from losses to sustainable
profitability. The company’s focus on cost efficiency, operational optimization, and scaling its business operations has
resulted in positive outcomes, delivering value to stakeholders and achieving a robust financial position by 2024.

20 80
Sum of ROA
10 60
(%)
Sum of Net Profit
0 40 Margin (%)
-10 Sum of ROE 20 Sum of Gross
(%)
-20 0 Profit Margin (%)

-30 -20 Sum of Operating

Sum of Net
Profit Margin (%)
Profit Margin
-40 -40
(%)
-50 -60

REGRESSION ANALYSIS
The regression analysis investigates the relationship between Price/BV (Price to Book Value) and Stock Price.

P/BV Vs Stock Price y = 108.13x - 84.733

300 R² = 0.7254
250
200
150 Total
100 Linear (Total)
50
0
2.05 3.75 6.95
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INTERPRETATION

The regression analysis reveals a positive correlation between Price/BV and Stock Price, with the coefficient of 47.45
indicating that an increase in Price/BV is associated with a rise in stock price. However, the p-value of 0.24 for the Price/BV
coefficient suggests that this relationship is not statistically significant, meaning that we cannot confidently predict stock
price changes based solely on Price/BV. While the model explains 86.5% of the variance in stock price (as indicated by the
R-squared), the high standard error and wide confidence intervals point to a degree of uncertainty in the prediction, and
the overall model is not statistically robust, as evidenced by the F-statistic of 6.39 and the Significance F of 0.24.

DuPont Analysis

DuPont analysis is a framework that decomposes Return on Equity (ROE) into three key components: profit margin,
asset turnover, and financial leverage. This method provides insights into the factors driving a company's ROE.

Net Profit
Year Asset Turnover Equity Multiplier ROE (Return on Equity)
Margin

2018 -28.83% 0.38 2.06 -145.83%

2019 -9.71% 0.41 1.95 -37.76%

2020 -16.96% 0.44 1.70 -52.93%

2021 -9.87% 0.51 1.50 -30.49%

2022 -4.22% 0.57 1.20 -15.42%

2023 2.60% 0.60 0.12 0.19%

2024 20.70% 0.65 0.05 6.01%

Net Profit Margin has improved significantly from 2018 to 2024. Initially, the company experienced large losses, with
margins as negative as -28.83% in 2018, but by 2024, it turned highly profitable, achieving a Net Profit Margin of
20.70%. This shift indicates improved cost control, revenue generation, and operational efficiencies over time.
Asset Turnover has shown consistent improvement, moving from 0.38 in 2018 to 0.65 in 2024. This suggests that the
company has become more efficient in using its assets to generate revenue. The growth in asset turnover reflects better
utilization of company resources, which is a positive indicator for financial performance.
Equity Multiplier (Financial Leverage) has steadily decreased, from 2.06 in 2018 to just 0.05 in 2024. This dramatic
reduction in financial leverage indicates that Zomato has become more conservative in its use of debt. It has reduced
reliance on external financing (debt) and opted for equity financing, which reflects a lower risk profile but also limits
potential returns from leveraging.
Return on Equity (ROE) has experienced a significant turnaround, moving from a highly negative figure of -145.83%
in 2018 to a positive 6.01% in 2024. This positive ROE is a result of both improving profitability (Net Profit Margin) and
increased asset efficiency (Asset Turnover), albeit with low financial leverage. The lower leverage has limited the upside
of ROE, but the company is still on a growth trajectory.
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CONCLUSION
Zomato Pvt Ltd has shown significant growth in key financial metrics from 2018 to 2024. The company’s market
capitalization has surged from ₹487 million in 2018 to approximately ₹2.46 trillion in 2024, indicating substantial growth
in its business value. Profitability has also improved, with a positive net profit margin of 20.7% in 2024, compared to a
negative margin of -71.42% in 2018. Similarly, return on equity (ROE) has turned positive, rising from -145.83% in 2018
to 3.62% in 2024, reflecting better returns on shareholder investments. However, liquidity ratios, such as the current and
quick ratios, have declined over the years, pointing to a reduction in short-term financial flexibility.
In terms of efficiency, Zomato’s asset turnover has improved, showing more effective use of assets to generate revenue.
The inventory turnover ratio, however, has decreased, suggesting slower movement of goods. The company has
significantly reduced its reliance on debt, with the debt-to-equity ratio decreasing from 2.06 in 2018 to 0.05 in 2024,
indicating improved financial leverage. The valuation ratio, represented by the P/E ratio, has decreased from 447.74 in
2023 to 331.67 in 2024, suggesting a decline in investor willingness to pay high premiums for earnings. Overall, Zomato
has become more profitable and efficient while reducing debt, though its liquidity and valuation have been under pressure
in recent years.

SUGGESTIONS:
Improve Profitability: Focus on enhancing profit margins through better cost management and operational efficiencies
to stabilize earnings and reduce volatility in stock valuations.
Strengthen Liquidity: Work on improving liquidity ratios by increasing cash reserves and managing working capital
efficiently to ensure stability during market fluctuations.
Optimize Capital Structure: Maintain a balanced approach to debt and equity to support growth while minimizing
financial risk.
Enhance Customer Retention: Implement strategies to improve customer loyalty and retention, ensuring steady revenue
growth and long-term stability.
Monitor Market Valuation: Be cautious of overvaluation by balancing growth with solid financial performance to
maintain investor confidence.
Increase Operational Efficiency: Focus on improving supply chain, delivery logistics, and partnerships to reduce costs,
boost revenue, and enhance profitability

1. Zomato Annual Reports (2018-2024)

2. Financial websites (Moneycontrol, Bloomberg, Reuters)