Weeks before Zomato announced its March quarter financial results, the company had increased its platform fees by 25% to Rs 5 per order, as well as discontinuing its intra-city food delivery service called Intercity Legends.

In August 2023, Zomato introduced a platform fee of Rs 2 as it sought to increase its margins and generate profits. The company then raised the fee to Rs 3 before raising it again to Rs 4 on January 1. The platform fee was temporarily raised to Rs 9 on December 31.

With the company's share price reacting positively to the developments in January, analysts say the platform fee increase will partially neutralize the impact of GST on delivery charges.

Zomato covers orders of around Rs 85-90 crore annually. An increase in each Re 1 benefit charge across all geographies could result in a positive impact of Rs 85-90 crore on EBITDA, representing approximately a 5 percent positive impact on EBITDA. However, this increase is currently only effective in some cities.

Meanwhile, the company has temporarily suspended its Intercity Legends service, which delivers orders from upscale restaurants in major cities to customers in other cities. When you click on the Legends tab in the Zomato app, a message appears, "Improvements in progress. Stay tuned and we'll get back to you soon."

The food delivery company's stock price has risen thanks to increased profitability in its core business and the rapid growth of its grocery subsidiary, Blinkit.

Zomato's food delivery business saw a 30 percent rise in adjusted revenue year-on-year, hitting Rs 2,025 crore in the December quarter on a consolidated level. Blinkit's revenue during that time period increased twofold to Rs 644 crore.

Zomato reported a consolidated net profit of Rs 138 crore against a net loss of Rs 347 crore in the same period last year. Revenue rose to Rs 3,288 crore from Rs 1,948 crore in the previous year.

The company's shares trade at 115 times earnings, well above multiples for global rivals including Uber, Deliveroo and Meituan.

Goldman Sachs Group Inc. expects earnings forecasts to rise for Zomato's "fast-selling" business Blinkit, analyst Manish Adukia wrote in a recent note. While "early conversations with investors indicated skepticism about the viability of this business model," concerns should ease as more results are reported, he said.

Rich valuations for Zomato looked justified given the "significantly higher" projected revenue and profit for the company, according to an analyst at ICICI Securities Ltd. Abhisek Banerjee. Shares moved in line with Doordash Inc., the broker added. over the past six months due to improving sentiment in tech stocks around the world.

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