Kotak Institutional Equities has raised the per-share fair value of Zomato, the food and grocery delivery platform, to Rs 125 from Rs 100 earlier. The increase in fair value is based on the company’s FY23 annual report, which highlights the rise in the contribution margin for food delivery. The margin increased significantly to Rs 18.5 per order in FY23 from Rs 6.6 in FY22. This increase was driven by higher revenues and cost optimization measures.

Kotak has valued Zomato’s food delivery business at Rs 83,100 crore using a discounted cash flow (DCF)-based valuation methodology. Zomato also operates the quick commerce platform Blinkit and the business-to-business grocery sourcing service Hyperpure.

The increase in Zomato’s contribution margin was primarily fueled by a jump of Rs 6.3 in revenue per order. Of this, Rs 2.7 can be attributed to a higher take rate, and Rs 3.6 to increased advertising revenue. The reduction in variable costs amounted to Rs 5.2 per order, driven by lower discounts and other expenses. Additionally, delivery costs saw a minor drop of Rs 0.4 per order.

In FY23, Zomato’s average order value for food delivery increased by 2% YoY to Rs 407.

Zomato’s operating revenue for FY23 stood at Rs 7,080 crore, compared to Rs 4,190 crore in FY22. The operating revenue from food delivery grew 33% YoY to Rs 4,530 crore in FY23.

In the June quarter of FY24, Zomato reported its first-ever quarterly net profit of Rs 2 crore, boosting its stock price to new 52-week highs. The stock price reached Rs 115 apiece, nearing a market capitalization of $12 billion.

For the quarter ended September 30, UBS estimated that India’s food delivery market grew 10% sequentially. Zomato’s volume growth for July and August was estimated to be 2% and 4% respectively, while Swiggy recorded volume growth of 7% and 6% for the same months, according to UBS.