Zomato clarifies shutdown of Blinkit stores, stock surges 5%

Zomato clarifies shutdown of Blinkit stores, stock surges 5%

Key Points of Zomato Clarification on Blinkit Stores Shutdown:

  • Zomato clarified the temporary unavailability of the Blinkit instant groceries app and the shutdown of several Blinkit stores.
  • Changes were made to the delivery partner payout structure across the Blinkit business to improve customer experience, address the needs of delivery partners, and reduce fraudulent activities.
  • Zomato reassured investors that the disruptions and changes have no material impact on the company’s operations or financial performance, with a revenue impact of less than 1%.
  • Blinkit delivery executives servicing about 50% of the dark stores in the NCR area are currently on strike since April 12, 2023, demanding a roll-back of recent changes made to delivery incentive structures in the region.
  • ICICI Securities analysts estimate that Blinkit was operating approximately 370 dark stores across India as of Q3FY23, with around 25% of the dark stores currently not operational due to the strike.
  • The strike has resulted in a 1% loss in revenue from Blinkit and a 0.15% loss of consolidated revenue for Q1FY24.
  • ICICI Securities analysts estimate that food delivery GOV will remain flat sequentially in Q4FY23E (+14.2% YoY), given seasonally weaker quarters and online consumption fatigue trends.
  • The brokerage maintains a BUY on Zomato with a DCF-based target price of Rs65, with the company’s m-cap currently over ₹46,625 crores at the current market price.

Details of Zomato Clarification on Blinkit Stores Shutdown:

Zomato Clarifies Shutdown of Blinkit Stores Due to Changes in Delivery Partner Payout

Zomato, the popular online food delivery platform, has provided clarity on the temporary unavailability of the Blinkit instant groceries app, which led to the shutdown of several Blinkit stores. The company attributed the disruption to changes made to the delivery partner payout structure across the Blinkit business. Zomato revealed that the changes were made to improve customer experience, address the needs of delivery partners, and reduce fraudulent activities by a few delivery partners in the system.

The clarification followed a report that claimed Blinkit was unavailable for a few days, leading to exchanges seeking clarification from Zomato. In response, the company confirmed that they had to shut down some stores temporarily to ensure the safety of employees and delivery partners. However, most of the stores have now resumed operations.

Zomato reassured investors that the disruptions and changes have no material impact on the company’s operations or financial performance, with a revenue impact of less than 1%. Zomato’s shares rallied by 5% following the clarification.

Currently, Blinkit delivery executives servicing about 50% of the dark stores in the NCR area are on strike since April 12, 2023. The demands are of roll-back of recent changes made to delivery incentive structures in the region. ICICI Securities analysts estimate that Blinkit was operating approximately 370 dark stores across India as of Q3FY23, with around 25% of the dark stores currently not operational due to the strike. This has resulted in a 1% loss in revenue from Blinkit and a 0.15% loss of consolidated revenue for Q1FY24.

Despite Zomato Gold activation, ICICI Securities analysts estimate that food delivery GOV will remain flat sequentially in Q4FY23E (+14.2% YoY), given seasonally weaker quarters and online consumption fatigue trends. The brokerage estimates Zomato’s Hyperpure business (B2B) to grow 26% QoQ and Blinkit to grow 30% QoQ, indicating sustainable growth in new businesses.

The note states that while the further slowdown in growth poses a risk to FY24E/FY25E estimates, Zomato’s risk-reward is still skewed to the upside. The brokerage maintains a BUY on Zomato with a DCF-based target price of Rs65. Zomato’s m-cap is currently over ₹46,625 crore at the current market price.

About Zomato:

Zomato, established by Deepinder Goyal and Pankaj Chaddah in 2008, is a multinational restaurant aggregator and food delivery enterprise based in India. As of 2022, Zomato operates in over 1,000 Indian cities, offering users access to restaurant information, menus, and reviews, as well as food delivery services from partnering restaurants.

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