In Monday’s trading session, the shares of one of the well-known and sole food delivery app company listed on the stock exchanges, saw a significant uptick, rising 4.3 percent to hit a record high of Rs. 232 on BSE.
As of 03:18 p.m., the shares of Zomato Limited were trading in the green at Rs. 229.05, up by nearly 3 percent, as against its previous closing price of Rs. 222.45, with a market capitalisation of Rs. 2 lakh crore.
With this surge, Deepinder Goyal, the founder and CEO of Zomato, has entered the prestigious “billionaire’s club,” as the shares of his food-tech company reached an all-time high.
Platform Fee hike:
The fluctuations in share prices followed Zomato’s decision to raise its platform fee by 20 percent, increasing it from Rs. 5 to Rs. 6.
This new platform fee is set to apply initially in metro cities like Delhi and Bengaluru, and is anticipated to positively impact the profitability of Zomato. The company plans to implement this revised fee structure gradually across India.
This marks the 5th increase in Zomato’s platform fee over the past year, initially changing from Rs. 2 to Rs. 5. It’s important to note that this platform fee is different from delivery fees, GST, restaurant charges, handling fees, and other associated costs.
This fee is directed straight to the company, supporting the company’s cost management and revenue enhancement efforts.
While a Re. 1 increase per order may seem negligible to customers, Zomato, which handles approximately 22-25 lakh orders daily, stands to gain an additional Rs. 25 in income each day.
Collectively, food delivery companies could potentially generate an additional revenue of Rs. 1.25-1.5 crore daily just by the implementation of this platform fee.
Previously on 16th June, Zomato confirmed that the company is in discussions with Paytm to acquire Paytm’s movies and ticketing business.
However, no binding decision has been taken at this stage that would warrant Board approval and subsequent disclosure in accordance with applicable law.
Brokerages’ views on Zomato:
ICICI Securities:
The brokerage maintained a ‘buy’ rating on Zomato with a target price of Rs. 300 per share, representing a potential upside of nearly 32 percent from the current trading price of Rs. 227.7.
Meanwhile, Blinkit is ramping up its expansion of dark stores, achieving adjusted EBITDA breakeven in March 2024. Management plans to double the store count to 1,000 by FY25, with a pipeline of around 300 stores ready.
This aggressive expansion strategy in key markets aims to capture market share in Quick Commerce through geographical expansion while competitors prioritise profitability.
The management anticipates near-zero EBITDA in the upcoming 2-3 quarters, aligning with their accelerated growth plans.
Despite ICICI Securities reducing Blinkit’s adjusted EBITDA estimate for FY25 by 68 percent, the estimate for FY26 has been revised upward by 11.4 percent.
In the food delivery sector, the brokerage believes in revenue growth through recent innovations such as bulk ordering and veg-only fleet options. Additionally, optimisations in the gold plan and priority delivery services are expected to contribute to further profitability improvements.
Elara Capital
Elara has a ‘buy’ rating on Zomato with a price target of Rs. 280 per share, indicating a potential upside of 23 percent from the current trading price of Rs. 227.7.
According to Elara Capital, alongside advertising revenue and increased commissions from restaurants, the platform fee has emerged as a key driver for enhancing Zomato’s profitability.
For FY24-25, Zomato is projected to handle nearly 87 crore food orders annually. Elara Capital estimates that a Re. 1 increase in platform fee would positively impact EBITDA by Rs. 85-90 crore, translating to a 6-7 percent boost in EBITDA.
The global investment banking firm further highlighted that a Re. 1 rise in platform fees across all cities would enhance take rates by 30-35 basis points. Looking ahead, the brokerage anticipates Zomato’s platform fee to potentially reach Rs. 8-10 per order in selected metro markets over the medium term.
In its Q1 earnings preview, Elara Securities forecasts Zomato to achieve an overall revenue of Rs. 3,960 crore in Q1 FY24-25, marking a 63.9 percent year-on-year increase, driven by growth in food delivery and e-commerce operations.
Morgan Stanley
According to Morgan Stanley, a Re. 1 increase in platform fee enhances both take rate and contribution margins by 20 basis points, while boosting adjusted EBITDA for Zomato’s food delivery segment by 5-6 percent.
The global brokerage firm highlighted that the overall financial impact should be considered alongside discounted pricing for gold membership offered during renewals.
Morgan Stanley recommended an ‘Overweight’ rating on Zomato, with a target price of Rs. 235 per share.
Financials:
The company experienced significant growth in its revenue from operations, showing a year-on-year rise of 73.2 percent from Rs. 2,056 crore in Q4 FY22-23 to Rs. 3,562 crore in Q4 FY23-24.
Similarly, its net profit increased during the same period from a loss of Rs. 188 crore to a profit of Rs. 175 crore.
Stock performance:
In the last 1 month, the stock has delivered 20.6 percent returns, while it has delivered multibagger returns of nearly 183.6 percent in one year, and around 70.5 percent returns in the last six months. So far in 2024, the shares of Zomato have given about 82.5 percent of positive returns.
About the company:
Zomato Limited operates as an internet portal which helps connect the Users, Restaurant Partners/Third-party merchants and Delivery Partners and also provides a platform for restaurant partners/brands to advertise
themselves to the target audience in India and abroad and supply ingredients to Restaurant Partners.
Incorporated with the name DC Foodiebay Online Services Private Limited, Zomato has two core business-to-customer (B2C) offerings – Food delivery and Dining-out, in addition to business-to-business (B2B) offering and Hyperpure.
Written by Shivani Singh
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