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Zomato Ltd
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Ladies and gentlemen, a very good evening and welcome to Zomato Limited's earnings conference call. From Zomato's management team, we have with us today, Mr. Akshant Goyal, Chief Financial Officer; Mr. Albinder Singh Dhindsa, Founder and CEO of Blinkit and Mr. Kunal Swarup, Head of Corporate Development.
Before we begin, a few quick announcements for the attendees. Anything said on this call, which reflects outlook for the future or which could be construed as a forward-looking statement may involve risks and uncertainties. Such statements or comments are not guarantees of future performance and actual results may differ from those statements.
Additionally, please note that this earnings call is scheduled for a duration of 45 minutes, and we will be starting directly with the Q&A section of the call.
[Operator Instructions] The first question is from the line of Mr. Ankur Rudra from JPMorgan.
So congratulations on the great execution and hitting the profit milestone for the ex Blinkit business. The first question I had was on what drove the profitability this time. Clearly, on a quarterly basis, it appears that it's come from a lot more cost management in -- both in the food business, in the Blinkit business on utilization and also rationalization of staff and A&P costs. The question I think we have to an extent is when do we see sustainable growth? And what is sustainable growth for this business after seemingly 3 quarters of very limited volume growth? Is Zomato beginning to hit any penetration challenge due to reversal of consumer behavior.
Thanks for your question. Akshant on this side. So we've given a breakup of key contributors to margin improvement on the food delivery business, right?
So I think I would say it's a combination of both growth in revenue as well as improvement in -- or reduction in cost per order. And as you can see in that chart on Page 5 of the letter, it's all across the board. So as we've been saying over the last few quarters that we've been trying to look at all levers of efficiency in the business. And I think the team has been executing well across the board and the incremental gains are leading to [Technical Difficulty] and I think post just started to see a little bit of bounce back which is what is going to lead to a modest high single-digit growth in the current quarter sequentially, which is what we have indicated in our letter, right?
I think what we'll have to wait and watch is how -- whether this momentum sustains beyond Q1. And that's something we'll have to wait and watch. At this point, I think we've shared whatever we could on what we're seeing on the growth front in our letter.
No, I appreciate that, and I appreciate the forward-looking things you mentioned in the letter about the first quarter. My question was a bit more taking a step back about penetration. And where we are from an India perspective. Is there any concern that there could be an issue from the penetration side and any kind of reversal in consumer behavior, which might impact sustainable growth on a multiyear basis, not for next quarter or next year?
Yes. No, I think Ankur, we've been saying that in the past that from a long-term perspective, we are pretty bullish on the fact that we are still underpenetrated in this market in India. And I think that view hasn't changed, if that was your question.
Okay. The second question is on MTUs. You have given a clarification in the letter, but you also highlighted that Zomato Gold drove frequency increasing of 60% in that cohort of customers. Now I understand in 4Q, you'll probably have an impact of the number of working days, but you had that last year as well. Just couldn't entirely understand why MTU should, if your Zomato Gold drove our frequency so sharply?
So I think year-on-year, I think the MTUs are still growing. So I think the drop in MTU is in comparison to the previous quarter. And we've addressed that in the latter that it's a function of a few things, including lesser number of days also because of Zomato Gold actually, the MTUs have come down, not gone up because we do see an impact of clubbing of some orders in the same households, which might have just single membership.
So Zomato Gold, in fact, we think has led to reduction in MTUs and not an increase, while the frequency goes up, but number of people ordering typically, we have seen in the past, goes down. So we also shut down 225 cities in that quarter, which we reported last time. So that also had an impact, a onetime impact of MTUs reducing on our platform.
Okay. Understood. I mean, the reason for the question was I thought MTUs normally reflects frequency also of your annual users, which is why the question. But I understand what you're saying. On Blinkit, could you talk about how the business is evolving on an SKU mix footprint and network design at a city level over the last 4 quarters, given we've seen significant improvement?
Ankur, this is Albinder. I'll take this one. In terms of SKU mix, I think we are still very much tied to our philosophy of keeping high moving low involvement purchases on the platform. Essentially, these are SKUs where consumers have a lot of brand trust, and they need those things frequently as well, squarely focused on making sure that, that is a need that we serve to our customers within 10 minutes. And I think a lot of the gains that you are looking at, what we've pointed out also is a mix of both more customers adopting the quick commerce platform as they go to buying channel. And as a range of products is also increasing, there's basically cautiously increasing it to still stay within the principles that we set for ourselves for the assortment.
Understood. And any change in the footprint network design as you're thinking about scaling this stuff going forward, Albinder?
I think we are still very much focused on going deeper in our existing cities. Even our largest city, which is Delhi NCR we are still nowhere close to being able to cover it even 70%. So I think our primary focus will be scaling up our existing cities in the near future, and then we will look at footprint expansion.
Sure. And I think when I just look at the [ CM ] level performance, at the level you're reducing the [ CM ] losses, you should be profitable on a [ CM ] basis next quarter.
I really hope so.
Okay. Just last question, maybe for Deepinder. We've obviously seen a lot of departures Deepinder in the last year. Your business performance, at least on a profit business has not been impacted. I wondered if you maybe help you -- I mean, ask you -- if you could address any kind of comments about how it's impacted the Tier 4 main access for the business, restaurant partners, delivery partners, customers and tech?
Ankur, Deepinder is not on this call. right? But I think the -- to answer your question, I think the team is doing well, and it's also visible in the results. And we think things are looking good from a business as well as employee's perspective.
Next question is from the line of Mr. Vivek Maheshwari from Jefferies.
A couple of questions. First, Akshant, if I look at your release says that about 30% of your users have opted for Gold, right? And their frequency has gone up by about 60%. So if I gold -- and on top of that, there is an MTU reduction on a sequential basis, right, slightly. So if I just do a rough math, it looks like that I would have thought that the customers who would have dropped off would be the low-value customer from that standpoint. So the -- but if I do the math of Gold, the residual customer base, it looks like the frequency has gone down by about between 10% and 15% sequentially. Why would that be the case if let's say, 0.8 million customers have dropped off the -- from the MTU base?
Vivek, the 30% is the share of orders, it's not actually the number of customers. So a number of customers will be lower than 30%. And if you do the math that way, you will perhaps not get to the same answer.
So I did run up some permutations, even if -- because 30% is the GOV number, I have made some assumptions on AOV, but that number still is declining reasonably, Akshant. With 0.8 million customer users or MTUs in the base lower this time around, why should that frequency go down? Shouldn't frequency go up if you don't have those 0.8 million customers?
So this 30% again is for the month of March, not for the quarter. I think if you will do the same math like to like across quarter, we know for a fact that the frequency hasn't reduced. It's, in fact, stayed flat and there's also an impact of, as I mentioned, clubbing of some orders.
So if I'm a Non-Gold member and a Gold member in the same household, we do see some negative impact of the Non-Gold member doing lesser orders, right? So net of that, the frequency for the Non-Gold members have stayed flat in the last quarter.
I see. Okay. Okay. Secondly, on food delivery itself, you have articulated and you have been mentioning these things for the last a couple of quarters in terms of the profitability ambition and all of that, with growth being illusive recently, how much of that is to be blamed to macro environment slowdown? And how much of this is because of your own focus on profitability?
And in that context, how do you see this panning out over the next, let's say, 1 or 2 years, Akshant?
Yes. So Vivek, I mean, if you look at really what drives -- or which are the levers we control as a business which drives growth on the platform the largely, I think either customer delivery charges or to some extent indirectly also delivery cost, right? Because if we increase the delivery radius, you will see customers will have more choice and we typically see them ordering more. And similarly, if the delivery charges are lower, that stimulates demand, right?
So if you look at the chart on Page 5, again, and we've mentioned is that both these, whether it's customer delivery charges or delivery cost, they have not changed much over the last year, right?
And I think point we're trying to make here is that, we're not really -- the improvement in profitability is not, therefore, coming at the cost of growth. That's what we believe. And the efficiency and the improvement in margins has been on account of levers, which does not necessarily impact customer growth. So at least our view is that our improvement in profitability has a very, very little to no impact on what the growth would have been had and we not had these changes.
Got it. Got it. And a couple of questions on Blinkit as well. First is with the media articles talking about some of the disruption to Blinkit business a few weeks back. How much of its impact could we see in the first quarter fiscal '24. [indiscernible] meaningfully?
Vivek, this is Albinder. So we also said this in our filings, we expect the impact to be fairly minimal. We had some store shutdowns for very few days. In fact, in most of the places, it was less than 2 days. And the primary reason that we made this change was because we had old constructs that were put in place in 2020 when we started the dark store business, which allowed some partners to be able to earn a lot more without putting in the same effort that all the other partners are putting in. So we wanted to remove that, and that led to some unrest on the ground. But we expect that not to be a factor in our overall financial performance for the quarter.
Got it. And are you back to 100% level before this disruption? Are you back to full normalcy?
I think right now, in terms of rider logins, we are still not 100% there, but that is not just because of disruption, it's also summer time. And during this time, we typically see at the onset of summer, the rider log-ins are lower as people are adjusting to higher temperatures in Northern India. But we do expect that overall in terms of our ability to supply to customers, we are back 100%.
Okay. Got it. And one question Albinder, if I look at the entire -- the retail journey in India over the last 20 years, one of the -- and there was a phase where retail was growing very well in, let's say, early part of middle of 2000s. And we are seeing very strong growth in quick commerce business in general for the industry. Now I know that you have third-party who manages inventory and it's on their books. But how do you ensure that the system doesn't choke?
I know these are again fast-moving products, but I'm sure there will still be a fair amount of balance sheet risk that your partners and therefore, you carry directly or indirectly, how do you ensure that the inventories are the ABC criteria or [ fee for ]. How are those things managed given that the intensity of action at each of the dark stores will be very, very high?
See, I think Vivek when you put our comparing the Blinkit business to the off-line retail business. Fundamentally, the difference is Blinkit is primarily a tech-focused business that has built the entire system of not just managing inventory for our sellers, but also the entire supply chain end-to-end. All of that was built in-house.
When it came to the retail businesses, there was -- there are obviously a lot more factors, including on-ground operations and there was a lack of technology maybe back in 18 years ago or 20 years ago, that was not helping and having a great visibility into what was happening across the entire supply chain. So I think one of the fundamental reasons, Blinkit is the most efficient quick commerce business in the countries because we have spent a lot of years building the technology and the backbone that actually powers all of that for us, provides us visibility at every step of the supply chain. So we take a lot of pride in being very heavily tech-focused supply chain company that runs an efficient org.
Next question is come in on Mr. Vijit Jain from Citigroup.
Akshant, Just a question on Gold program. Now have you -- since you started charging for the program, do you continue to see sign-ups at a similar kind of pace? And how do you think in general about the pricing plus frequency mix in the sense that at what kind of band, does it become accretive versus your current contribution margins?
We've been always charging Vijit. It was never for free. And I think we'll will keep optimizing the pricing basis, what we see what will -- basis the customer behavior we see. So yes, I think like beyond that, I think the specific answer to your question will be very difficult for us to share. It's also competitively sensitive.
Sure. My second question is just in the dine-out business. Now I can see in your other revenues, if I strip out the one-off from, I think, Talabat that there is some improvement Q-o-Q and you did start some initiatives on the dine-out side this quarter. So can you talk a little bit about that and how to think about that in FY '24. And if I can add a follow-up question on just the services side. Is there any natural fit in some segments in local services? Were you thinking you guys are well suited to add that as an extension?
So to answer the second question first. At this point, no. I think we are just like focused on restaurants as far as the off-line business is concerned. And on the dining outside, I think we continue to make progress both in terms of the number of restaurants we cover and our value proposition both for customers and restaurants. But at this point, it is still very, very small compared to our overall business.
And we don't expect that to change much even in FY '24, right? So I think it will take perhaps a few more quarters before that business becomes meaningful. And at that point, we'll, of course, share more details about how that business is shaping up.
Got it. And Akshant, one last question. It looks to me at least like some of the ordering frequency has maybe improved a little bit Q-o-Q, your MTUs obviously declined likely the ordering frequency been decline. Is that fully attributable to the Gold program, do you think?
Yes. Part of it is I think both the MTUs coming down and frequency going up. There's some -- the Gold -- amount of Gold has definitely impacted both of these things.
And like we've said, part of it has also come from the shutdown of those 225 cities. With that and churn in the bottom percentile of customers.
Next question is from the line of Mr. Sachin Salgaonkar from BofA.
Congrats with a great set of numbers, fantastic execution. First question, Akshant, just wanted to go to the Page 5 chart. And we look to extrapolate this chart from, let's say, FY '23 to FY '24. What has for you guys could be the top 3 levers, which could lead to further improvement in the margins out here? Could it be some of the areas which we have not yet seen much improvement like a decrease in delivery cost? Or would it be the same stuff like an improvement in, let's say, commissions has gone so far?
Hi, Sachin. So yes, I think we expect improvement or other contribution from all of these things as we move from INR 18.5 per order contribution to whatever we get to by the end of next year. I think we've also mentioned in the letter that delivery cost has not changed much despite a lot of what we have done in the past because of various reasons.
But going forward, we do expect that to change. So we are hoping that delivery cost -- reduction in delivery costs will be more than what we've seen in the last year.
And likewise, I think revenue should continue to increase, and we also expect our other variable costs to continue to come down as the efficiency in the business goes up in general and also because of a little bit of operating leverage that we have in some of these things.
Got it. Second question, we did see an impact on Zomato Gold on contribution margin, and you did point out to the fact about the frequency increasing and MTU decreasing. Is a large part of that impact largely behind? Or could we continue to see that similar kind of an impact going ahead as well?
No, I think as the program scales that impact will continue to be there. Now whether that leads to a decline in MTUs further or not, I think it's a function of, again, multiple other things, including the number of new users that we had going forward. As well as how we are able to increase the frequency of the existing customer base, right? So we don't expect MTUs to go down further on a net basis, and we're hoping that they will go from here.
And incrementally, the impact on cost could be a bit more negative before the inflation point reaches and starts improving?
Yes, one could say that.
Got it. And maybe a couple of questions on Blinkit. Again, if you look at the chart on Page 7. One sees a huge improvement coming from decrease in dark store and replenishment expenses. Albinder, it would be great if you could give a bit more color what happened in this entire INR 48.9 and how much room is there to further improve this?
Hi, Sachin. So look, Sachin, we are primarily a supply creation business. So all of this improvement is basically can be attributed to increasing number of orders on the platform. So on the same fixed cost basis, we are just able to do more throughput for every store, and that's what leads to this improvement.
So instead of looking at it as a cost reduction, this is just same cost, and we are just able to push through a lot more throughput through these stores. Like we've also mentioned, we have stores. Our average is about INR 15,000, the GOV of about INR 15,000 per square foot for the entire quarter, but we have stores which are already doing INR 30,000 of GOV per square foot. So that shows you kind of the operating leverage even within our existing network that is still there. And what you're seeing here is basically the journey that we probably did from going from INR 7,500 to INR 15,000.
Got it. And last question. Of course, last year, Akshant, food inflation was high, perhaps one of the reasons why, let's say, AOV moved up. As we go into this year, should we see that normalizing and hence, perhaps an impact being seen on the business?
Yes. So so far, look, I think we've not seen that much. I mean, like inflation has been pretty range bound last few months, but I think AOV is still strong. And if at all trending upwards. So at this point, it feels like, if you look forward next 1 year, we don't expect the AOVs to fall maybe they'll remain flat.
Next question is from the line of Mr. Gaurav Rateria from Morgan Stanley.
Mr. Rateria are you on the line?
We can circle back to Mr. Rateria later. Our next question is from the line of Mr. Swapnil Potdukhe from JM Financial. Please go ahead.
Good set of numbers, so congratulations on that. So just wanted to start with the first question which I had asked last time also is like where are we accounting the Gold revenue that you are getting right now, exactly which line items are we showing that?
Hi, Swapnil. This is Kunal here. We are accounting for this revenue in the food delivery business essentially. [Technical Difficulty].
Hello?
Sorry, we were experiencing some trouble with our conferencing system. Swapnil you have to tell us till what point that you hear, Kunal's answer, and we'll pick it up from there.
I think you mentioned that it was accounted in the food delivery vertical, but beyond that, I think we lost it.
Yes, that's correct. Essentially, it's been accounted for in the food delivery business.
But the revenue that's -- so the revenue is recognized net of the discounts as per accounting standard.
So eventually, I think very little of that is left as revenue. I think most of it gets knocked down from the cost.
Almost 50% is knocked down due to discounts.
Right. Right. That's very helpful. The second question is on your employee expenses. Now they seem to have come down sequentially quite a bit, and I assume that is because of ESOP expenses going down. Is that related to some of the senior management moving out in the last quarter? Or like there is some other reason? And is that sustainable?
So that is -- so you're right to the extent that it is on account of reduction in the ESOP charge, but it is not necessarily related to the exits that we saw.
This will go up and down, Swapnil. So I think there are sort of various assumptions there when you come to this number from an accounting standpoint. And so don't expect this to be linear. And that's why we have, in our letter indicated what we think could be a potential accounting charge on account of ESOPs in FY '24.
Right. And with respect to your working capital now, I see that there was a change of INR 140 crores, negative INR 140 crores in this quarter, whereas in the previous quarter, it was a positive impact of [ INR 140 crores ]. Now my presumption is that the only hyperpure business has inventory, right? So why are we seeing such drastic changes on a quarter-on-quarter basis in your working capital?
Yes. So Swapnil, essentially, the increase in working capital that you see in Q4 is related to a reduction in the current liabilities in the business or rather most of it is on account of reduction in current liabilities, and I'll explain why. For example, in the food delivery business, there's a weekly settlement cycle with our restaurants. Now if you look at the last quarter, Q3, that ended on a Saturday, whereas Q4 ended on a Friday.
So effectively, we -- in the Q3, we carried 1 extra day of tables on our balance sheet as of the end of 31st December, and that reduced in Q4, and that essentially reduced the current liability number. And that caused the increase in working capital largely. So in our business, therefore, you will see these variations depending on the day of the week on which the quarter ends. And therefore, we put out that note saying that it is a little unpredictable as to how working capital changes going forward.
Right. And just one last question, if I can squeeze in. With respect to store additions, the guidance that we had given last quarter. Now if I were to calculate your numbers or basis what is available, I think there has been not much of an addition in this quarter. And do you -- so given that background, would it be fair to say that your improvement in margins is mainly because of improvement in throughput. But as and when you add those stores that you have guided for, the improvement in Blinkit margins would slow down significantly?
No, Swapnil, I think even through this quarter, we did add the stores pretty much at the run rate at which we had guided for the year that the total number of stores, what we will add. So that effect is already existent in the numbers that we have presented.
So there is unlikely that there is deviation from this trend over the next couple of quarters at least that I see. So we did add stores in this quarter as well at the pace that we had guided on.
But the average number seems to be flattish. That's my question. If I wpuld...
So there are some stores that we also end up closing occasionally, but we are on track to open the number of stores that we had guided at the beginning of the year.
Next question is from the line of Ms. Sneha Satyamoorthy from Axis Capital.
Ms Sneha, are you on the line?
Sorry, can you hear me?
Yes, please go ahead.
So in your last letter, you had shared a chart on power customers. Just wanted to get a sense on how does the AOV on orders from these customers compared with those of the remaining MTUs on the platform? That's my first question.
We don't share that data,, Sneha. But just to give you some broad color, they tend to be slightly higher than the, as to the users.
Okay. Sure. And my second one is that could you also give some additional context around some of the recent key partnership announcements that have been made. What do they entail? And what's the likely impact on driver payouts or delivery cost over the next few years as we scale the number of EV-based deliveries.
An entire ecosystem is very early Sneha. What we are trying to do is essentially further the adoption of EVs by essentially helping some of these third-party EV providers connect with our riders and offer a solution to our riders that works for them from an economic standpoint.
At this point, we are not looking at this as a way of sort of reducing our delivery cost, but it is more from a perspective actually impacting the carbon footprint that we have. Eventually, when the adoption reaches high levels, and the ecosystem matures from an EV infrastructure standpoint, we may see some improvement in costs. But at this point, we don't see any of that rectifying.
Next question is from the line of Mr. Aditya Suresh from Macquarie. Please go ahead.
I just had one topic to ask. So your restaurant take rates have clearly improved fairly nicely over the past couple of years is up about 200 basis points. We're now close to about 18%, right? So few sub topics with this. So if you look at the number of restaurants, who are there as partners on your platform. That's been steady over the past several quarters. I guess it's an element of the better paying restaurants on your platform. Do you see scope for further gains here as that mix improves, Akshant?
I think yes, I think broadly, I think we want our take rate missionaries to be competitive, and we still think we are lower than what the competition is charging. So I think as we continue to add more value to respond businesses, we expect some improvement in commission revenue going forward.
And then I guess in terms of the industry structure, just a bit more -- probably a bit more short term. We've seen kind of headlines about, say, someone like Coke, take a stake in Thrive, et cetera. I fully appreciate there are significant scale differences. But at the margin, are you seeing any increase in competitive pressures at all? Or do you still see this as a duopoly?
I think it's a fairly competitive market, and I think there's a lot of innovation happening around us across the board. So I think we continue to watch it, and learn from it and see how we can run our business better to make sure that we continue to grow.
And I guess related to that was, again, just a similar question, which I was, like platforms like Yulu and [ OTC, ] et cetera, now. The headline view which they take is to be able going to try it on restaurant take rates meaningfully lower, I guess, there's a trade-off here between delivery costs versus take rates. But how do you think about this impacting your own ability to charge is 18%, not for this quarter, but if you take a medium-term view, how do you see this kind of risk?
You see, I think direct ordering anyways exist and we do believe a lot of our restaurant partners get a large number of orders directly placed with them either through phone or to their own website or apps, right? And take rate on those orders is technically 0, right? So I think, like, as I said, we welcome any change or any innovation that helps the restaurants industry grow and there are a lot of bunch of innovation happening out there. And we'll continue watching it and learning from it. At this point, we don't feel anything is going to come at the cost of our growth. I think the penetration is low. And therefore, there is room for everyone to go in this market right now.
If I can, I have a question for Albi. So Albi, in your recent kind of one of the LinkedIn post, you spoke about ChatGPT and how you're seeing kind of positive use cases being built for Blinkit. Can you just elaborate on that a little bit?
Aditya, So we primarily used the generative AI, both from ChatGPT and from Midjourney and Stable Diffusion to create a recipe discovery platform on Blinkit. That is an additional use case that we think customers really think is adjacent for them. And using AI, we've been able to build that. We already use a significant amount of AI within our -- both our supply chain systems as well as within our customers' personalization and recommendation systems. We're fairly excited about what generative AI is doing.
Right now, I think our best bet was actually launching it for recipe generation. We are also looking at other parts of the business where some of this might be useful. As of now, we really want to focus on one thing and get it right first before we start scaling it to other parts of the supply chain or the customer service ecosystems.
Next question is from the line of Mr. Chirag Shah from CLSA. Please go ahead.
Mr. Chirag are you on the line?
Hello, can you hear me?
Yes, please go ahead.
Congrats to the team on generating first quarter of cash surplus. Bulk of my questions have been answered. But just on Hyperpure, Akshant, this business has now achieved reasonable scale. So what are the growth and profitability plans for this business going forward?
So I think we expect the growth momentum to continue in this business. I think it's still reasonably small in size compared to the opportunity here. And as we continue to scale, given that fairly high operating leverage business. We also expect the losses to continue coming down. So yes, I think both from a top line and bottom line perspective, I think we are excited about this business.
In terms of just this number of cities presence, how do we expand this to the number of cities that we are present right now?
At this point, we're not necessarily thinking of expanding into more cities. I think the within the 9, 10 cities that we are present in, the focus is just going to continue to grow in those cities and get to profitability first before we think of expanding outside these 10 odd cities. I think the business model may need a bit different in the smaller cities for this to work. So while we might experiment in 1 or 2 small cities, in the next few months, but largely, the focus is on the top 10 cities right now.
Got it. And when I look at the delivery partners number, there's a good 7% reduction that we have seen since Q2. Is there much to read into this? Or Albinder did make a statement that there is some seasonality also involved in this in terms of riders being on the platform.
Yes. I think, look, eventually, the number of delivery partners is not the only metric which one should look at. I think as these delivery partners are big workers in nature and different partners spend a different amount of time on the platform. So the number of active partners may go up or down depending on how many hours they're spending with us, right? So the nature of fleet might change from quarter-to-quarter depending on seasonality and various other factors, and in some quarters, you might have a much larger part time fleet as compared to others, and therefore, the number might go up.
But if you were to look at the number of log-in hours, and we don't disclose that data, but that trend is sort of in your [ end ] and we are seeing the number of log-in hours grow every quarter.
Got it. Last question Akshant, and just a bookkeeping one. The treasury income for the quarter -- this quarter has been quite high. So what's leading to that?
Sorry, you're talking about the cash received in terms of the cash flow?
That's right. That's right. That's right. So I'm looking at Page 11, the change in cash number.
Like we explained, there are differences in this number because the nature of investments impacts the cash flows that we get on a quarterly basis. So for example -- to take the example of G6, right? So you have like 6 monthly coupons. So you may have a quarter where you receive more cash on account of the coupon or the G6, but the next quarter, you may not have that on and then the quarter thereafter, you may have it.
So it's things like these that impact we may also premature some of our fixed deposits. So that may also cause these fluctuations in the cash amount. But the -- of course, the income accrued income that we booked in the P&L will be stable.
Next question is from the name is Garima Mishra from Kotak.
Now if I see your 4Q FY '22 results release, you very clearly told us that 60% of your GOV for that quarter for the food delivery business. was contributed by top 8 cities. So could you give us an update of how much is that contribution? I mean, now or for 4Q FY '23?
That number hasn't changed too much, Garima. We don't report it, but it's not changed much. Essentially, the growth has been pretty secular across our top 8 cities and the cities beyond them as well. So it's no meaningful change there.
Okay. And with the advent of Gold, this proportion has not changed at all, Kunal. I mean I would have expected that the uptake of Gold. And you also selectively give out these invites. I would have thought that the sort of run rate of orders from the top 8 cities just increases a little bit higher. So is there any impact on that at all visible in the, let's say, first quarter?
Garima, Gold is already live in almost 50 cities now right? So that contributes to almost around 25%, 30% of our business. So that loan will not be a factor in the cities gaining share in our overall business.
Okay. But the bigger cities have not been shared. I mean that's what you are trying to say on an overall basis?
Are not very meaningful.
Okay. The second question is on AOV. And of course, we've seen that increase pretty decently through FY '23. So safe to assume that your 4Q AOV was decently ahead of what you had in the first quarter that there was an increase through the year?
Yes, that's right.
Okay. Understood. And that trend, again, has not changed for you meaningfully in the first quarter.
Right.
Okay. Understood. Those were my questions. The last part is really for Albinder. Do you see AOVs of the Blinkit business go up and down a little bit. And anecdotally, at least, I can tell you that the more the user uses the platform, the lower the AOV actually goes up. How do you really solve this problem in the medium term when most of your stores actually start maturing?
Garima. So actually, when we look at our data the conjecture that you made that as users use the platform more, their AOV goes down is not entirely true. In fact, our new user AOV is low, and that is what contributes to a lower AOV for the platform. And as our users mature, their AOV and the number of categories that they buy from us it keeps increasing, contributing to the increasing view of the platform.
So it's actually an inverted curve that a new user will have a much lower AOV. And as they become used to the platform, their purchases on the platform also keep going up. The AOV fluctuations that we have seen over the last couple of quarters on the platform, a lot of these are seasonal factors.
And even towards the end of the fourth quarter, we started seeing the AOVs improve because the seasonality factors, especially in fruits and vegetables were going away. And then you will see some seasonal factors. We are also a fairly large platform for festivities. So all at-home festivals that people celebrate with their families. That's something that Blinkit is a part of a lot now.
And those also add a lot of meaningful variance in our quarterly AOVs. So for Valentine's Day might only have a [indiscernible] or bring a couple of chocolates. But something like a Mother's Day or Rakhi or bigger festivals, you might see a lot of gifting and more higher AOVs ending in the city. So it's -- right now, the business is still fairly early, I would say, where we can confidently point out how each of these factors is going to play in to our AOV. But I think over the next couple of years, as the business gets larger and we have a lot more data, we'll be able to predict it better.
Ladies and gentlemen, in the interest of time, we will now be taking the last question. The last question is from the line of Mr. Ashwin Mehta from AMBIT.
So one question for Albinder. If I look at your cost of dark store and replenishment, that over the last 3, 4 quarters has been stable on a per dark store basis at somewhere closer to INR 50 lakhs. So is it more like a fixed expense. How do we kind of get that down?
Sorry, I think the overall dollar number for that is primarily because we will build capacity to a certain level for the dark store and replenishment network, and there is a base level of cost that you run for it. I think we are still at the stage where we have not reached a meaningful enough utilization of some of these assets where we will start seeing this number has been going down as a percentage of the throughput that we put through, but this is sort of the base network that we need to build in order to be able to service 400 stores and to be able to serve 4 million customers, so far, right?
And I think we still haven't meaningfully hit it. So this number overall will not change significantly, but our throughput will increase. So on a per order basis, this number will keep going down.
Okay. Fair enough. My second question was in terms of hyperpure integration with Blinkit and possibly Hyperpure supplying you fresh. So on that, where are we?
See primarily, what we are developing with hyperpure is a farm to table supply chain for fruits and vegetables. Because Hyperpure is a pretty significant business when it comes to restaurant supplies and supplying fresh fruits and vegetables there. And obviously, Blinkit also has some of that business.
So a lot of our integration is primarily on the capabilities So if we are putting in joint infrastructure at the farm gate, that is something that we're investing in with Hyperpure. And I think that is something that is still ongoing, and these are long-term projects because we have to do the hard work of actually reaching out to rural areas, setting up collection centers, collecting forward linkages.
And that is our shared load that both teams differently do depending on where we have strengthened where Hyperpure needs, where Hyperpure has a strength.
Okay. Okay. And the last one was in terms of did I get that correct? We talked about a 30% to 40% increase in dark store count in the next fiscal. Do we still stand by that?
So I think the earlier question was also about the net store additions. I think we added maybe about 15 stores in the first quarter -- in the fourth quarter. And I think we are pretty much on track to -- we are still pending on the similar numbers that we will keep doing store additions. So we're not really providing a different guidance for that. The number might go up or down based on whether we find the right places and whether locations and a lot of these factors, but that is what the team is still aiming for.
Okay. And If I can please just one for Akshant. Akshant, you were talking about reworking our advertising business. So where are we in terms of that?
Ashwin, do you -- are you referring to the dining out business?
Yes, the dining out business, yes.
So I had mentioned that in response to a previous question, Ashwin. So we have -- I think that business is shaping up nicely, but it is still very small from an overall size and impact on the P&L perspective. So while we are very excited about how that business is turning out to be and how it can grow. But at this point, I think it's still very small.
Ladies and gentlemen, we will now conclude this conference call. Thank you for joining us, and you may now disconnect your lines.