Zomato, the online food delivery behemoth, addressed the closure of many Blinkit locations on Wednesday. 

The unavailability of the fast food app is due to changes in delivery partner compensation throughout the Blinkit company. For a few days, Blinkit services were unavailable. Zomato shares increased by at least 5% after the explanation.

Zomato Foodtech has been asked to clarify a story that stated Blinkit was momentarily unavailable. Zomato responded to the conversations on Wednesday.

It said, “Over the last few days, we have made changes in the delivery partner payout structure concerning the Blinkit business to address the needs of delivery partners, improve customer experience, and reduce cancellation/order rejection frauds by a few delivery partners in the system.”

Such changes are made as needed,” the business said in its filing. As a result, Zomato said that they had to close certain locations for a few days to safeguard the safety of our personnel in stores and delivery partners.

However, the majority of these shops have already reopened.

Finally, Zomato said, “These disruptions and changes have no material impact on the Company’s operations / financial performance (meaningfully less than 1% revenue impact), and thus we believe that this event does not warrant any disclosure.”

Zomato shares were trading at 54.51 per share on the BSE at the time of writing, up 2.17%. With an intraday high of 55.90, the stock has gained at least 4.8% on the market.

At the current market pricing, the company’s m-cap is more than 46,625 crore.

Blinkit e-grocery delivery executives who service around 50% of the dark retailers in the NCR region are currently on strike since April 12, 2023. According to media sources, the demands are for a rollback of recent adjustments made to the region’s delivery incentive systems.

According to ICICI Securities analysts, Blinkit operated 370 dark shops throughout India as of Q3FY23. This means that 25% of the dark shops are presently closed. Given that at least 3-4 days of sales have already been missed, this means a 1% loss in Blinkit revenue and a 0.15% loss in consolidated revenue for Q1FY24 – already.

ICICI Securities analysts noted in a recent research note on Q4 results, “We estimate food delivery GOV to remain flat sequentially in Q4FY23E (+14.2% YoY) despite Zomato Gold activation.” Given a typically poor quarter and online consumption fatigue tendencies, we are cautious. We anticipate a 1% QoQ decrease in food ordering AOV due to the elimination of delivery costs for Gold members. We anticipate that the food ordering contribution margin will stay constant QoQ as restaurant take rate rises offset delivery subsidy increases.”

Furthermore, the brokerage expects Zomato’s Hyperpure business (B2B) to expand 26% year on year, and Blinkit to grow 30% year on year, owing to increased geographical reach. Overall, it anticipates adjusted revenue growth of 9.5% QoQ and 68% YoY in Q4FY23E, as well as flattish consolidated EBITDA QoQ, showing consistent development in new companies.

The brokerage’s comment on Zomato stock price said that “slowing growth was evident in GOV due to post-Diwali consumption fatigue and the online-to-offline shift. However, we retain BUY on Zomato with a DCF-based target price of Rs65 based on continuous improvement in the underlying operational indicators. We recognize that a further slowdown in growth creates a risk to our FY24E/FY25E predictions, but we believe the risk-reward is currently skewed to the upside at CMP.”