Online food delivery giant, Zomato on Wednesday clarified over shutting down of several Blinkit stores. The reason behind the unavailability of the instant groceries app would be the changes in the delivery partner payout across the Blinkit business. Blinkit services were shut down for a few days. Following the clarification, Zomato shares rallied by at least 5%.
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Exchanges had sought clarification from Zomato over a report that claimed Blinkit was temporarily unavailable.
Zomato on Wednesday released its response to 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.
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Hence, Zomato said, they had to shut down some stores for a few days to ensure the safety of our employees at stores and the delivery partners.
But most of these stores have now resumed 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.”
At the time of writing, Zomato shares traded at ₹54.51 apiece up by 2.17% on BSE. The stock has gained by at least 4.8% on the exchange with an intraday high of ₹55.90 apiece.
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The company’s m-cap is over ₹46,625 crore at the current market price.
Currently, Blinkit delivery executives servicing about 50% of the dark stores in the NCR area are on strike since April 12, 2023. As per media reports, the demands are of roll-back of recent changes made to delivery incentive structures in the region.
ICICI Securities analysts estimate Blinkit was operating ~370 dark stores pan-India as of Q3FY23. This implies ~25% of the dark stores are currently not operational. Given that at least 3-4 days’ sales have already been lost, this implies ~1% loss in revenue from Blinkit and ~0.15% of consolidated revenue for Q1FY24 – already.
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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.”
Also, the brokerage estimates Zomato’s Hyperpure business (B2B) to grow 26% QoQ and Blinkit to grow 30% QoQ led by an increase in geographical reach. Overall, it estimate adjusted revenue growth of 9.5% QoQ and 68% YoY and flattish consolidated EBITDA QoQ in Q4FY23E, indicating sustainable growth in new businesses.
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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 Rs65. 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.”
