Zomato’s Profits — From Interest Income, Not Core Business

Introduction

Zomato, the food delivery app that has become a household name in India, has recently reported profitable quarters. However, there’s something important you should know — the profits aren’t coming from Zomato’s core food delivery business but from its interest income. How is this possible, and what does it mean for Zomato’s long-term sustainability?

The Story of Zomato’s Profitability

Zomato’s most recent earnings report showed it was in the black for the first time since going public. The company reported a net profit of ₹200 crore in Q3 FY25, but a closer look reveals that a large chunk of this profit came from interest income earned on the huge cash reserves Zomato holds from its IPO

and earlier rounds of fundraising.

The company has been generating significant interest on the funds it raised from investors. While this is good in the short term, it raises a bigger question:

Can Zomato become profitable from its core business of food delivery?

Core Business Challenges: Why the Food Delivery Business Isn’t Profitable Yet

Zomato, like its main competitor Swiggy, continues to face huge losses in its core food delivery business. In fact, its gross order value (GOV) continues to grow, but its delivery costs and discounting practices are eating into the profits.

In recent years, Zomato has been offering heavy discounts to attract and retain customers, which has contributed to the losses. Additionally, the company faces high operational costs, including paying delivery partners and managing a vast logistics network across the country.

The Profits from Interest Income — What’s the Catch?

While Zomato’s profits from interest income may look impressive, they’re not sustainable in the long term. If the company doesn’t find a way to improve its core food delivery margins and reduce reliance on interest income, future profitability could be at risk.

Moreover, interest rates are not guaranteed to stay high, and if the economy slows down or if Zomato has to use its cash reserves to fund growth, this cushion could quickly disappear.

Conclusion: What’s Next for Zomato?

Zomato’s growth story is impressive, but investors and stakeholders should keep an eye on the company’s ability to convert its business model into sustainable profitability. The path to profitability will depend on reducing operational costs, increasing delivery efficiency, and finding new revenue streams beyond just food delivery and interest income.