Zomato, the prominent online food delivery platform, issued a clarification on Wednesday regarding the closure of multiple Blinkit outlets. The temporary unavailability of the Blinkit instant grocery app was attributed to modifications in the delivery partner payout structure that impacted the entire Blinkit enterprise. Blinkit services remained suspended for a brief period. As a result of this clarification, Zomato’s stocks surged by a minimum of 5%.
Zomato was requested by exchanges to provide clarification regarding a report stating that Blinkit was not available for a temporary period.
On Wednesday, Zomato issued its official response to the exchanges.
It said, “Over the last few days we have made changes in the delivery partner payout structure with respect to the Blinkit business to address the needs of delivery partners, improve customer experience and reduce cancellation/ order rejection frauds by few delivery partners in the system.”
“Such changes are done from time to time, as needed,” the company’s filing added.
Therefore, Zomato stated that they had to close certain outlets for a few days to guarantee the well-being of their employees and delivery partners.
However, the majority of these stores have now resumed their operations.
Finally, Zomato also said, “These disruptions and changes have no material impact on the operations /financial performance of the Company (meaningfully less than 1% revenue impact) and hence we believe that this event does not warrant any disclosure.”
As of writing this, Zomato’s shares were being traded at INR 54.51 each, exhibiting a rise of 2.17% on the BSE. The stock has gained a minimum of 4.8% on the exchange, with an intraday high of INR 55.90 per share.
As per the current market price, the company’s market capitalization exceeds INR 46,625 crore.
Since April 12, 2023, approximately 50% of dark stores in the NCR region have been affected by the ongoing strike of Blinkit’s delivery personnel. According to media reports, the strikers are demanding a reversal of the recent modifications made to the delivery incentive system in the area.
According to ICICI Securities analysts, as of Q3FY23, Blinkit was running approximately 370 dark stores across India. This suggests that roughly 25% of these dark stores are presently not in operation. As at least 3-4 days’ worth of sales have been forfeited, this translates to a potential loss of roughly 1% in revenue from Blinkit and approximately 0.15% of the consolidated revenue for Q1FY24.
For Q4 results, in the latest research note, ICICI Securities analysts said, “We estimate food delivery GOV to remain flat sequentially in Q4FY23E (+14.2% YoY) despite Zomato Gold activation. Our view is restrained given a seasonally weaker quarter and online consumption fatigue trends. We estimate 1% QoQ decline in food ordering AOV as delivery fees have been waived for Gold members. We estimate the food ordering contribution margin to remain stable QoQ as restaurant take rate improvements may offset delivery subsidy increases.”
Additionally, the brokerage firm anticipates Zomato’s B2B Hyperpure enterprise to expand by 26% quarter-on-quarter (QoQ) and Blinkit to expand by 30% QoQ, driven by an expansion in their geographic presence. Overall, the estimate is for a 9.5% QoQ growth in adjusted revenue and 68% YoY growth, along with a steady consolidated EBITDA QoQ in Q4FY23E, signifying the sustainable growth of Zomato’s new businesses.
On Zomato stock price, the brokerage’s note said, “slowing growth was evident in GOV due to post-Diwali consumption fatigue and the online-to-offline shift. However, based on sustained improvement in the underlying operating metrics, we maintain BUY on Zomato with a DCF-based target price of INR 65. We acknowledge that further slowdown in growth poses a risk to our FY24E/FY25E estimates, but we think, at CMP, the risk-reward is still skewed to the upside.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of SnackFax. We advise investors to check with certified experts before taking any investment decisions.
