Zomato announces 10-min delivery: Outlook on shares

Zomato update
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Online food delivery platform Zomato announced that it will deliver food in just 10 minutes. The move comes after the company announced its acquisition of Blinkit last week. Here are the details

Zomato's 10-minute delivery: Highlights

  • The 10-minute delivery will be under Zomato Instant and will compete with quick-commerce startups such as Zepto.
  • Zomato CEO Deepinder Goyal announced that Zomato will deliver food to customers in just 10 minutes. The service will start in April, and the project will kick-off only in four stations in Gurugram for now.
  • Consumers can expect food items like bread omelet, chai, biryani, momos, coffee, poha, etc in this category. The other items will have a usual 30 minutes or more delivery time.

Here's a look at how the model is different from the 30-minute delivery model

The concerns around the announcement

  • Post the announcement, there were concerns for the safety of the delivery partners. To deliver food in 10 minutes, they may rush on the road. It is not safe for them as well as others on the road.
  • To answer the critics, Goyal clarified the concerns. He mentioned that the company will continue to educate its delivery agents on road safety.
  • Also, the delivery partner does not have to rush as they won't be informed about the promised delivery time. For them, every delivery will be a normal delivery. 
  • There will be no incentives for delivering the order on time or penalties for late delivery.

‘Zomato Instant’ idea was inspired by Blinkit

  • Zomato’s founder Deepinder Goyal said that after becoming a frequent customer of Blinkit. He started feeling that the 30-minute average delivery time by Zomato is too slow, and would become obsolete. In case Zomato doesn’t do it, somebody else would attempt it, he noted. 
  • According to founder Deepinder Goyal nobody in the world has so far delivered hot and fresh food in under 10 minutes at scale, and the company is eager to be the first to create this category, globally.

Outlook on shares

While the latest announcement comes as good news to customers, analysts seek clarity on how it will impact the bottomline. Hence, investors should await further clarity before looking to buy the stock. Zomato has to scale up significantly higher, maybe two or three times its present size before it starts to generate meaningful profits. The road to profitability remains unclear. This is causing a lot of distress amongst the minority shareholders, Dipan Mehta, Founder of Elixir Equities said in a note. Zomato shares have been under pressure, falling by over 55% from all-time high of Rs 169. The shares closed 0.6% lower at Rs 80.65.

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