Zomato hikes platform fees: shares climb 5% as platform fees plunges to Rs 5

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On April 20th, Zomato, the online food delivery service, notified users via its platform regarding a 25% increase in platform fees, now totaling five rupees. The online food delivery platform also announced discontinuation of its intercity delivery services previously known as Intercity Legends. Platform fees denote the amount customers are billed per order, bolstering the company’s overall profit margin. These charges are applicable in all capital cities for now.

Zomato initially implemented a nominal platform fee for customers ordering food online through its platform, starting at a minimal amount and gradually increasing to three rupees, then four rupees in January 2024.

Zomato handles approximately 85-90 crore orders annually. This hike in the platform fees is going to positively affect and could give favorable impacts on the earnings and profit shares of Zomato. This is estimated to roughly have a 5 percent positive effect on EBITDA.

Intercity food Deliveries on a halt-

At present, the company has also temporarily halted its Intercity Legends service, which facilitated the delivery of orders from leading restaurants in major cities to customers residing in different cities. The Zomato app now says “Enhancements are in progress. Please stay tuned as we prepare to resume serving you soon.” under the intercity option.

Initially launched in 2022, the intercity service facilitated food delivery from only chosen restaurants in particular cities to a specific selection of other cities. Just three months after the intercity delivery service was launched, Siddharth Jhawar, Zomato’s Head of Intercity Delivery, resigned from the company.

As Monday’s market session commenced, Zomato’s shares surged by 5% to reach Rs 197.80 apiece, following the company’s decision to raise the platform fee by 25% to Rs 5, just weeks ahead of its Q4 FY24 results.