Why Swiggy, Zomato have increased platform fees ahead of festive surge

Food delivery platforms are turning to platform fee hikes to lift margins during the festive season. Swiggy has raised its levy to ₹15 per order — its third increase in as many weeks and the steepest yet. Zomato, too, has pushed its fee up by 20% to ₹12.

For Swiggy, today's move comes after a brief hike to ₹14 on Independence Day before settling back at ₹12. With current order volumes estimated at over 2 million a day, the new rate could generate up to ₹3 crore in daily revenue. That’s an incremental ₹54 crore every quarter, or ₹216 crore annually, if sustained.

Both companies typically experiment higher fees during peak demand before rolling them out across markets.

“The strategy of raising platform fees ahead of the festive season and retaining the higher rate later has been in place since last year. It helps shore up margins without touching customer discounts or delivery partner payouts,” said Karan Taurani, senior vice-president at Elara Securities.

Zomato’s increase to ₹12 per order follows Swiggy’s earlier hike. The company had last raised fees from ₹6 to ₹10 in 2023, and with this latest move, the charge has risen sixfold since introduction. According to Taurani, “For each rupee of platform fee, Zomato sees a 22 basis point positive impact on take rates, and about ₹1,100 crore in adjusted EBITDA gains on a five- to six-year basis. But given the fee is initially being trialled in 40% of markets, the near-term benefit will be modest.”

Margins continue to diverge between the two players. As of Q1, Zomato’s food delivery EBITDA margin stood at 4.2% — 180 basis points higher than Swiggy. Elara expects Zomato’s adjusted margins to expand by 120 basis points to 5.1% between FY25-28, supported by such fee hikes. Sustained higher take rates could push margins beyond 5% post-FY28.

Taurani added, “We maintain a Buy rating on Zomato with a target price of ₹340, while Swiggy is rated Accumulate with a target of ₹450 per share.”

With order volumes set to spike through the festive months, the two rivals are relying on fee hikes as a lever to improve profitability, and this could possibly mean that higher customer charges are here to stay.