Zomato pauses Intercity Legends service and increases platform fees by 25% to Rs 5

Zomato pauses Intercity Legends service and increases platform fees by 25% to Rs 5

The swift expansion of its quick commerce branch, Blinkit, and increasing profitability in its main business have driven the meal delivery company's stock price upward.

Zomato fulfills between 85 and 90 crore orders a year.

A few weeks before to Zomato's anticipated release of its March quarter financial results, the business raised its platform charge by 25% to Rs 5 per order and halted Intercity Legends, its inter-city food delivery service.

Zomato decided to increase its margins and turn a profit in August 2023, thus it reinstated the Rs 2 platform charge. After that, the firm raised the charge to Rs 3, and then on January 1, it raised it once again to Rs 4. On December 31, it had temporarily increased the platform cost to Rs 9.

Analysts projected that the platform fee increase would partly offset the effect of GST on delivery prices, given the favorable reaction of the company's share price to the news in January.

Every year, Zomato fulfills between 85 and 90 crore orders. There might be a positive effect on EBITDA of around 5 percent, or Rs 85-90 crore, from an increase in each Re 1 convenience charge across all regions. Unfortunately, as of right present, this raise only applies to a few cities.

The business has suspended its Intercity Legends service, which let consumers in distant cities to place orders with renowned eateries in big cities. On the Zomato app, when you select the 'Legends' option, it states, "Improvements are in progress. Stay tuned, as we will be returning to serve you shortly.

The swift expansion of its quick commerce branch, Blinkit, and increasing profitability in its main business have driven the meal delivery company's stock price upward.

Zomato's meal delivery division saw a 30 percent year-over-year gain in adjusted revenue in the December quarter, hitting Rs 2,025 crore on a consolidated basis. During that time, Blinkit's sales quadrupled to Rs 644 crore.

In comparison to the same time last year, Zomato had a consolidated net profit of Rs 138 crore as opposed to a net loss of Rs 347 crore. From Rs 1,948 crore to Rs 3,288 crore in revenue, there was a sharp increase.

At 115 times forecast earnings, the company's stock is trading much beyond the multiples of its worldwide competitors, such as Uber, Deliveroo, and Meituan.

Goldman Sachs Group Inc. analyst Manish Adukia recently stated in a note that the company expects earnings expectations for Zomato's "quick commerce" division, Blinkit, to grow. Although there was "earlier investor conversations suggesting skepticism around profitability of this business model," he said, this should subside as more data becomes available.

According to ICICI Securities Ltd. analyst Abhisek Banerjee, the "significantly higher" predicted sales and earnings for Zomato made the company's lofty valuations seem reasonable. The broker also said that for the last six months, the stock has surged in tandem with Doordash Inc. as global sentiment toward IT companies has improved.