Strikes by delivery partners associated with Zomato Ltd.'s quick commerce arm Blinkit have already caused about a 1% loss in revenues in Q1 FY24, according to analysis by ICICI Securities Ltd.
Delivery executives servicing about half of Blinkit's dark stores in the Delhi-NCR area have been on strike since April 12, demanding a rollback of recent changes made to delivery incentive structures in the region.
"We estimate Blinkit was operating about 370 dark stores pan-India as of Q3FY23. This implies 25% of the dark stores are currently not operational. Given that at least 3-4 days' sales have already been lost, this implies about 1% loss in revenue from Blinkit and about 0.15% of consolidated revenue for Q1FY24 already," it said in an April 17 note.
The strike by Blinkit's gig workers comes as the company is trying to move from a fixed-fee model of Rs 25 per delivery to a hybrid pricing structure of Rs 15 per delivery, plus added incentives based on distance travelled. This has led to delivery executives deeming a significant cut to their earnings potential.
The change in delivery fee structure indicates Zomato's efforts towards cost control, ICICI Securities said. "This would allow Blinkit to increase the delivery radius for their existing dark stores and thus improve its network coverage with limited capex."
It added that the company should clear the air over the matter, possibly through a combination of clearer communication on the expected change in earnings for delivery executives and/or through some concessions on the delivery fee.
Queries sent to Zomato didn't receive a response at the time of publishing this report.
ICICI Securities has a 'buy' rating on Zomato, with a target price of Rs 90 apiece, implying a potential upside of 66.6%.
Of the 27 analysts tracking the company, 21 maintain a 'buy,' three suggest a hold,' and three recommend a 'sell,' according to Bloomberg data. The 12-month consensus price target implies an upside of 40.2%.
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