Zomato raises platform fee to Rs 10 as festive season demand spikes

With a reported order volume of 647 million in FY23, the Re 1 increase could add Rs 65 crore to Zomato's annual revenue

Food delivery platform Zomato has increased its platform fee to Rs 10 from Rs 7, just ahead of the upcoming festive season.

“This fee helps us pay our bills and keep Zomato running. To maintain services during the festive season, it has increased slightly,” the company informed users through an in-app notification.

Zomato first introduced a platform fee of Rs 2 in August 2023 as part of its strategy to improve margins and move towards profitability. This fee was later increased to Rs 3, followed by a hike to Rs 4 on January 1. Zomato temporarily raised the fee to Rs 9 on December 31 last year, before now settling on Rs 10.

The impact of this Re 1 hike could be significant for Zomato, which reported an order volume of 647 million in FY23. A Re 1 increase would add Rs 65 crore to the company's topline annually.

Despite a smaller-than-expected rise in profit for the second quarter, Zomato continues to invest in expanding its operations. The company's margins were impacted by its ongoing investments in Blinkit, a quick commerce platform. Blinkit's network of "dark stores"—distribution hubs for fulfilling online orders—has expanded rapidly, with Zomato adding 152 new stores during the quarter, the highest quarterly addition to date, bringing the total to 791.

However, the contribution margin for Blinkit dropped slightly to 3.8 per cent from 4 per cent in the previous quarter. "Since new stores and warehouses take a few months to ramp up, they end up being margin dilutive in the short term," Zomato chief financial officer Akshant Goyal explained.

Zomato's revenue surged nearly 69 per cent to Rs 4,800 crore, while its consolidated net profit rose fivefold to Rs 176 crore for the quarter ending September 30, 2023.

To further strengthen its position, Zomato recently approved a fundraise of up to Rs 8,500 crore through a qualified institutional placement (QIP). The funds are expected to bolster the company's cash reserves, particularly following its acquisition of a digital payments firm's movie and events ticketing businesses.

Competition in India's online food and grocery delivery space is intensifying. Zomato's chief competitor, Swiggy, recently issued shares worth $448 million in its initial public offering, while Zepto raised $340 million in August and is expected to go public next year.