Zomato Introduces Priority Delivery Feature for an Additional Charge in Bengaluru and Mumbai

• ByStartupStory     |    April 26, 2024

Zomato, a leading food delivery company, has launched a new priority delivery feature that allows customers to receive their orders faster for an additional fee. The service is currently being piloted in select locations within the cities of Bengaluru and Mumbai, as reported by Moneycontrol.

Customers opting for this service can expect their food to be delivered significantly quicker. For example, in Bengaluru, users can pay an extra Rs 29 to have their order delivered within 16-21 minutes compared to the standard 21 minutes. This feature is also applicable to Zomato Gold subscribers, who will not be exempt from the additional charge.

The priority delivery option appears to be in its experimental stages, as it is not yet available in other major cities like Delhi-NCR and Kolkata. This suggests Zomato is testing the waters in select markets to gauge customer response before potentially expanding the service.

This development comes shortly after Zomato announced a 25% increase in its platform fees, now Rs 5 per order, and temporarily paused its Intercity Legends service. The company is gearing up to announce its March quarter results soon, with its stock price on the rise due to increased profitability and the rapid growth of its quick commerce branch, Blinkit.

In the December quarter, Zomato’s food delivery business saw a 30% year-on-year increase in adjusted revenue, totaling Rs 2,025 crore on a consolidated basis. Meanwhile, Blinkit’s revenue doubled to Rs 644 crore during the same period. Overall, Zomato reported a consolidated net profit of Rs 138 crore, a significant turnaround from a net loss of Rs 347 crore in the previous year, with total revenue jumping to Rs 3,288 crore from Rs 1,948 crore.

The company’s stock is currently trading at over 100 times forward earnings, a figure well above the multiples of global peers like Uber, Deliveroo, and Meituan. Goldman Sachs analyst Manish Adukia remarked on the positive outlook for Zomato’s Blinkit segment, stating, “earlier investor conversations suggested skepticism around profitability of this business model,” but he believes “concerns should ease as more results are reported.”

Similarly, ICICI Securities Ltd. analyst Abhisek Banerjee highlighted the optimistic valuation of Zomato, justifying the high figures due to the “significantly higher” projected revenue and profits. He also noted that Zomato’s stock movement has paralleled that of Doordash Inc. over the past six months, reflecting a broader improvement in sentiment towards tech stocks globally.

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