Not a rumor: Zomato explains platform fee hike, shares fall 4%

Zomato shares fell 3.51% to Rs 254.60 on the Bombay Stock Exchange after the company confirmed that the Rs 10 platform fee on its mobile app is not a rumor. The clarifications came in response to media reports that prompted stock exchanges to seek further details from the food delivery giant.

In its statement, Zomato stressed that the information about the fee hike came directly from its public mobile application. Zomato said, “We would like to state at the outset that this is not a rumor as the source of the information mentioned in the article is the Zomato mobile application itself, which is publicly available and anyone can see and check it.”

“Yesterday we actually increased the platform fee in some cities. Such changes in our platform fees are a routine business matter and are implemented from time to time and may vary from city to city,” Zomato added.

The announcement follows Zomato’s recently released financial results for Q2FY25, which showed a five-fold increase in net profit to Rs 389 crore on a 68% increase in revenue to Rs 4,799 crore. The growth is due to improved margins on food delivery and progress in the fast trading segment, which is approaching break-even.

Zomato has also received approval for a qualified institutional placement (QIP) that aims to raise up to $1 billion to strengthen its competitive advantage over rivals such as Zepto and Swiggy, which are actively seeking fresh funds.

Foreign brokerage house CLSA was positive on Zomato’s situation, suggesting that the stock may rise in the coming months. They raised their price target on Zomato from Rs 353 to Rs 370, citing strong growth potential in the fast trading sector. According to CLSA, this segment contributes significantly to Zomato’s business model, contributing Rs 271 to the company’s discounted cash flow (DCF) valuation, which has increased to Rs 428.

Zomato’s Q2 results exceeded expectations, both based on CLSA and overall market consensus. While the company achieved better-than-expected revenues and EBITDA, its profit after tax (PAT) was impacted by taxes and depreciation costs. Fast trading division Blinkit maintained stable margins despite rapid growth, adding 152 dark stores in the second quarter, its highest growth ever.

Core food delivery service Zomato continued to grow, albeit at a slower pace than in previous quarters. Gross order value (GOV) for food delivery increased by 21% year-on-year, and the number of monthly transacting customers (MTC) increased by 13% over the same period. While growth is slowing, these numbers indicate stable demand for Zomato’s services.

Despite the challenges of increased taxes and costs associated with Blinkit’s expansion, Zomato’s overall performance was considered encouraging. CLSA revised its earnings forecasts for FY25-27, lowering estimates by 21% to 54%. However, they raised their price target to Rs 370, citing the company’s strong future potential