The higher platform fee food delivery firm Zomato is will charge would partially offset the impact of GST on delivery charges, in case the company is liable to pay any, analysts have said.
GST authorities recently sent Zomato a show cause notice relating to an alleged tax liability of `401 crore, along with interest and penalty, for the period between October 2019 and March 2022.
While the company did not disclose which cities will see the impact of the platform fee hike, its spokesperson said, “These are business calls which we take basis various factors from time to time.” Zomato introduced a `2 platform fee in August last year, following rival Swiggy which began charging a similar fee in April and increased it to `3 in October.
Shares of Zomato rose as high as 4% on Tuesday, on the back of the news of the hike in the platform fee to `4 from `3 in some cities, and closed at a two-week high at `128.80 on the BSE.
Analysts believe both Swiggy and Zomato will eventually hike the platform fee to `5, as shown on the apps before discounts. They said these platforms have pre-supposed that consumer demand would not be affected by such price hikes as their customers largely consist of the top 5% of the country.
Analysts also pointed out that Zomato had charged a platform fee of `9 on New Year’s Eve, signalling an intent to make the fee structure more “dynamic”. Orders hit new highs on December 31 at Zomato and its quick commerce arm Blinkit, which had added a surge charge of `30 due to high demand at night.
Zomato is on a quest to strengthen its bottomline after turning profitable in Q1FY24, and gradually increasing its adjusted Ebtida margin for the food delivery business to 2.6% of gross order value in Q2. The company’s management now expects the adjusted Ebitda margin for food delivery to hit 4-5% in the medium term.
Analysts at ICICI Securities noted the margin guidance can be reached by FY25, driven by increase in ad revenue, optimisation of Zomato Gold programme and contribution from platform fees. They estimate the adjusted Ebitda margin for food delivery to be 5.4% by FY25.