Zomato Pro Discontinued? Shares of online food delivery app Zomato were trading lower on Monday as the company said that it has discontinued its loyalty program dubbed Zomato Pro. Additionally, Nomura Financial Advisory and Securities (India) Limited initiated coverage on Zomato with a “reduce” rating. Zomato shares declined more than 1 per cent to an intraday low of Rs 60.10 on Monday.
Zomato Pro was launched in 2020, and Zomato Pro Plus in 2021. Zomato Pro was a replacement for the Zomato Gold membership. The benefits of the Pro pack included discounts on food delivery and dine-in at the company’s partner restaurants.
Zomato Stops Onboarding, Renewal on Zomato Pro
Zomato informed users trying to renew their expired Pro membership about the same through a message. “Thank you for being a part of the Zomato Pro program. The membership is unavailable for renewal as we are working on a new and better experience for you. We request you to check the Zomato app to stay updated on the latest offerings,” the company noted in the message.
Zomato Working on a New Program?
The company spokesperson told News18.com that the company is working on a new program and are working closely with the customers and partners for the same.
“While Zomato Pro and Pro Plus have been loved tremendously by our customers and restaurant partners, we want it to be even more beneficial, especially for the most engaged customers and restaurant partners. We are taking feedback and working closely with our customers and restaurant partners to craft a new program. Meanwhile, we are not onboarding new members and restaurant partners to Zomato Pro and Zomato Pro Plus,” said in a statement.
Will Active Members Continue To Get Zomato Pro Benefits?
“While active members can continue to get their benefits as promised, they will not be able to extend/renew their memberships once their membership tenure expires. Once again, we are humbled by the love customers have shown towards Zomato Pro and Zomato Pro Plus, and we promise to come up with a bigger, better experience very soon,” it clarified.
What Should Investors Do Now?
Nomura Financial Advisory and Securities (India) Limited initiated coverage on Zomato with a “reduce” rating and a target price 19 percent lower than the prevailing price, saying a double-digit contribution margin in food delivery is a tough task.
Nomura set the target price at Rs 50, following which the stock fell more than a percent to trade at Rs 60.75 on BSE on August 22 morning.
Abhishek Bhandari, an analyst at Nomura Financial Advisory and Securities, said he expects Zomato’s food delivery business to become profitable at the adjusted Ebitda level by Q1FY24 led by disciplined execution in a duopoly market.
Bhandari said Zomato’s target of reaching “double-digit” contribution margin in the long term hinges on a rise in commissions from restaurants, which he expects to rise from 15 percent in FY22 to 17.5 percent in FY31. The target would also call for higher customer delivery fees, which Bhandari said would be difficult.
However, it contrasts to the opinions of Kotak Securities and Jefferies who see the stock as a buying candidate. Jefferies has a target of Rs 100, while Kotak sees the stock’s fair value at Rs 79.