The platform fee for Zomato has been increased from Rs 7 to Rs 10 just prior to the festive season. The food delivery platform stated that “this fee helps us pay our bills and keep Zomato running. To maintain services during the festive season, it has increased slightly.” This update was made to the users in-app notification.
To note, the impact of this one rupee hike can be significant for Zomato, as it reported an order volume of 647 million in FY23. So to say, one rupee increase would add Rs 65 crore to the company's topline annually.
Furthermore, Zomato continues to invest in expanding its operations, despite a smaller-than-expected rise in profit for the second quarter. Also to note, the company's margins have been impacted by its ongoing investments in Blinkit, which is a quick commerce platform.
Blinkit's network of "dark stores" - distribution hubs for fulfilling online orders - has expanded rapidly. For this, Zomato added 152 new stores during the quarter. So by bringing the total to 791, this is the highest quarterly addition to date. Having said that, the contribution margin for Blinkit has decreased slightly to 3.8 percent from 4 percent in the previous quarter.
"Since new stores and warehouses take a few months to ramp up, they end up being margin dilutive in the short term," explained Akshant Goyal, Chief Financial Officer at Zomato. Moreover, Zomato's revenue has surged nearly 69 percent to Rs 4,800 crore. And its consolidated net profit has risen fivefold to stand at Rs 176 crore for the quarter ending September 30, 2023.
Zomato recently approved a fundraise of up to Rs 8,500 crore through a qualified institutional placement (QIP). This move has been carried out to further strengthen its position. The funds collected are expected to positively steer the company's cash reserves, particularly following its acquisition of a digital payments firm's movie and events ticketing businesses.
As competition intensifies, Zomato's chief competitor Swiggy, recently issued shares worth USD 448 million in its initial public offering to further strengthen its position. At the same time, Zepto raised USD 340 million in August and is expected to go public next year.
