Good morning [%first_name |Dear Reader%],

Looking at food delivery company Zomato’s share price now, it’s hard to believe the heights it scaled just months ago.

The company went public in July 2021 and by November, Zomato shares were trading at more than twice the issue price. But now, the share price is just 13% more than the issue price.

Sure, the global rout in tech stocks contributed to the decline, but even as those scrips rebound, Zomato is lagging behind. Maybe because, after its decision to forego holding quarterly earnings calls, investors are not getting answers to their questions about Zomato’s business.

Another factor could be that investors are not sure what to make of the imminent launch of Zomato’s 10-minute food delivery pilot in Gurugram and its reported all-stock acquisition of express grocery delivery service Blinkit. (We wrote about both last month.)

But, there is something that could work in Zomato’s favour. The only problem is, its investors will have to wait a while for it to play out.

Help from an unexpected quarter

When Zomato made a preliminary filing for its initial public offering (IPO) back in April 2021, we scoured the document for what the company intended to do on the ESG—environmental, social, and governance—front. Not a lot, as we argued in a piece last year.

But by the time Zomato filed its updated IPO prospectus in July, there had been a key change. A month earlier, Zomato had joined the EV 100 initiative by global non-profit Climate Group, and committed to make its entire fleet of over 160,000 vehicles electric by 2030.

It’s easy to dismiss this as an announcement that amounts to little for investors. After all, Zomato is one of more than 120 members of EV 100—Walmart-owned e-commerce giant Flipkart and bus aggregator Shuttl are also part of it.

But what if this EV transition is something that could actually improve Zomato’s unit economics? That’s the argument put forward by global brokerage HSBC Securities in a report published last week.

HSBC estimates Zomato’s current delivery cost to be nearly 14% of its average order value (AOV) of ~Rs 400 (US$5.3), up from under 12% in the year ended March 2021. Fuel becoming dearer could be the key reason here. Petrol and diesel prices have been hiked 12 times in just the last two weeks.

But if Zomato’s petrol-based two-wheelers were to be replaced with electric variants, the fuel cost would come down from Rs 12 (US$0.16) per order to Rs 2 (US$0.03), according to HSBC.

This would mean Zomato’s contribution margins per order—revenue minus variable costs—would rise from the current 1.3% to 3.8%.

But there’s a catch.