Zomato rises 5% as Blinkit stores reopen after wage protests

The share price of Zomato rose 5 percent in the afternoon trade on April 19 after the food delivery firm said that most of its Blinkit stores had reopened after wage protests.

Blinkit’s delivery executives have been on strike since April 12, demanding that recent changes to incentive structures be rolled back. Zomato is trying to shift from a fixed-fee model of Rs 25 a delivery to a hybrid-pricing structure of Rs 15  along with a supplementary incentive based on distance travelled, seen as a considerable cut in potential earnings by the delivery executives.

Blinkit, the food paltform’s grocery unit, has around 400 stores in India, of which 50 were shut, mostly in and around New Delhi, on April 14 as employees demanded better wages.

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“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,” Zomato said.

The disruptions would not have any material impact on the operations and financial performance of the company, it 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 under regulation 30 of the SEBI (LODR) Regulations, 2015,” the company claimed.

In Q3FY23, Blinkit’s revenue stood at Rs 3.01 billion and accounted for around 13 percent of Zomato’s total revenue, while EBIITDA (earnings before interest, taxes, depreciation and amortization) came at a negative Rs 2.27 billion.

Recently, domestic brokerage firm Motilal Oswal initiated coverage on the company with a “buy” rating with a target price of Rs 70. The foodtech industry was in its early days and should grow at a rapid 19 percent CAGR over FY23-25 on the back of rising internet penetration, consumption and urbanisation, it said.

Also Read: MC Long View | Is Zomato’s path to profitability coming at the cost of growth?

“With the food delivery market now a settled duopoly with high entry barrier, Zomato should benefit from industry growth and deliver 29 percent revenue CAGR over FY23-25 on a) higher penetration, b) higher proportion of transacting users, and c) increased ordering frequency,” it said. Heightened competition for Blinkit and attrition at senior leadership are areas of concern.

At 12.16 pm, the scrip was trading 2.44 percent higher on the NSE at Rs 54.60, while the benchmark Nifty was down 0.016 percent at 17,657.25.

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