Zomato's shares surged to new all-time high of Rs 232 as the company raised its platform fees to Rs 6 per order in major markets like Bengaluru and Delhi. The recent price hike represents an increase of 20% from the Rs 5 the two platforms were previously charging in these markets. Zomato along with its competitor company, Swiggy, initially charged Rs 2 per order last year, later increasing it to Rs 5 in select markets. In Bengaluru, Swiggy is currently teasing a platform fee of Rs 7, which is struck-off and discounted to Rs 6 at checkouts. Zomato increased its platform fee to Rs 5 per order from Rs 4 in key markets including the National Capital Region, Bengaluru, Mumbai, Hyderabad, and Lucknow.
Platform fees are seen as essential to delivery firms as they look to improve their take rates, which determine the amount of money they make on every order. With a duopoly in place, both Zomato and Swiggy have been experimenting with platform fees to boost their overall revenues and profits. Blinkit and Instamart, the quick commerce arms run by Zomato and Swiggy, also charge an equivalent fee called handling charges. In Bengaluru, Blinkit charges Rs 4 per order, while Swiggy Instamart charges Rs 5 per order. In Delhi, Blinkit charges Rs 16, while Swiggy Instamart charges Rs 5.
Zomato's food segment is estimated to do about 87 crore orders annually, and an increase of Re 1 in each convenience fee charged will lead to a positive impact of Rs 85-90 crore on EBITDA, which is around a 6-7 percent increase in profitability. If applied across all cities, an increase in platform fees will have a positive impact of 30-35 basis points on profitability. However, this hike is effective only in selective markets (Delhi and Bengaluru), and the positive impact on EBITDA could be a mere 1-2 percent (5-10 bps).
Analysts expects that Zomato's platform fee might rise to Rs 8-10 per order in select metro markets over the medium term, helping to offset the negative impact of zero delivery charges due to loyalty programs.
Zomato shares have been on an uptrend for a longer time frame and have rallied around 80% year to date nadand more than 180% in last 1 year.
