Zomato has started charging a dynamic fee for cash-on-delivery orders to offset high logistics costs. This move follows a period where the company's net profit fell by over 47% in the first quarter of fiscal year 2027, putting focus on its ability to protect operating margins.
Zomato has introduced a new 'Pay on Delivery Fee' for customers choosing cash as their payment method. The fee, which typically ranges between ₹5 and ₹20, is dynamic and varies based on the user and the order value. This change is currently effective, and it represents a broader effort by the company to manage its costs and encourage customers to shift toward digital payment methods.
Strategic Shift to Manage Costs
Handling physical cash involves higher operational costs for the company, including logistics, collection, and the risks associated with carrying cash. By charging a fee for this service, the company aims to offset these expenses and potentially improve its take-home revenue per order. This move is separate from existing charges like platform fees, packaging costs, and standard delivery fees, which are already part of the customer checkout process.
Financial Performance and Margin Pressure
The introduction of this fee comes at a time when the company, under its parent entity Eternal Ltd., is navigating financial challenges. In the first quarter of the fiscal year 2027, the company reported a consolidated revenue of ₹20,211 crore. However, its net profit dropped by 47.1% sequentially to ₹92 crore. This decline was largely driven by rising tax liabilities, which tripled to ₹180 crore, along with higher depreciation and finance costs.
While the company’s operating performance has been relatively stable—with EBITDA rising to ₹594 crore and margins at 2.9%—the significant drop in net profit suggests a need for tighter cost control. The additional revenue from the cash-handling fee is one way the company is attempting to protect these operating margins against rising non-operating expenses.
Competitive Position
This decision places Zomato in a distinct position compared to its primary rival, Swiggy, which has not implemented a similar surcharge for cash-on-delivery transactions. For investors, the key monitorable is how this difference affects market share. If customers perceive the platform as too expensive due to these cumulative fees, there is a risk they may shift their orders to competitors who do not levy such charges.
Risks for Shareholders
There is a risk that adding more fees at checkout could increase customer friction, especially among price-sensitive users. While the company likely analyzed user behavior to set the dynamic pricing, the actual impact on order volume and platform loyalty remains to be seen. If transaction volumes drop significantly or if the fee leads to a backlash in customer sentiment, the company’s ability to sustain growth in its delivery business could be tested. Investors will be watching the next few quarters to see if this strategy successfully improves profitability without sacrificing the company's market position or user base.