Zomato Gives Up Its Payment Aggregator RBI Licence

Zomato Payments Private Ltd has chosen to retract its application for a PA (Payment Aggregator)  license. The payments division of Zomato Ltd has opted to voluntarily surrender its license granted by the RBI for operating as an online payment aggregator. Citing a deficiency in competitive advantage, Zomato Payments Pvt. will surrender its certificate of authorization and withdraw its application, originally submitted on November 11, 2021, to function as an issuer of prepaid payment instruments. 

Rs.39 Cr Loss

Zomato recorded a Rs.39 crore loss in the March quarter due to a write-down of its investment in Zomato Payment Private Limited (ZPPL) which is why the fintech subsidiary surrendered its licenses to the RBI, citing commercial unviability in the payments sector, as disclosed in the company’s filing yesterday. 

Lack of Competitive Edge

Zomato attributed its decision to surrender its payment licenses to the evolving picture of the payment industry. The company noted that it did not perceive a significant competitive edge against existing players in the sector. This realization became more evident during the operational setup phase.

Services offered by ZPPL

Zomato, through the licenses, was authorized to manage online payments independently, providing services like wallets and cash cards to customers. This move aimed to enhance in-house control over digital transactions, aiming to reduce costs related to third-party payment services and merchant charges. Additionally, last year, Zomato introduced its own Unified Payments Interface (UPI) solution, Zomato UPI, in collaboration with ICICI Bank.

Bet on Blinkit

The successful outcome of their strategic investment in Blinkit has brought the company relief and great traction, sparing them from the potential repercussions of a failed acquisition. So, swiftly integrating Blinkit into the operations over the past few quarters has really given it a competitive edge and strengthened its position in the market, paving the way for continued growth.

Q4 Results

In Q4FY24, Zomato saw impressive financial gains compared to 2023. Net profit rose by Rs. 37 Cr to Rs. 175 Cr, revenue increased by Rs. 274 Cr to Rs. 3,562 Cr, and EBITDA grew by Rs. 35 Cr to Rs. 86 Cr, with the EBITDA margin expanding from 1.6% to 2.4%.

Check: Zomato reported Q4 results

Conclusion: Zomato’s decision to retract its application for the PA  license reflects a strategic move in response to industry dynamics, acknowledging the lack of competitive advantage. Additionally, the successful integration of Blinkit into its operations has further enhanced Zomato’s stance and profitability, demonstrating its adaptability and determination to thrive in the future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.