Shares of Zomato plunged to Rs 82.15 on the BSE in Tuesday’s intra-day trade on the back of heavy volume following reports that the competition Commission (CCI) on Monday ordered a detailed probe against food delivery platforms, Zomato and Swiggy, for alleged unfair business practices with respect to their dealings with restaurant partners.
The stock of food delivery company had hit a record low of Rs 75.55 on March 16, 2022. The stock had registered a record high of Rs 169.10 on November 16, 2021. Zomato had raised Rs 9,375 crore through initial public offer (IPO) by issuing shares at price of Rs 76 per share.
The counter witnessed huge trading volume of around 9 million shares on the NSE and BSE in the first half-an-hour of trade. At 09:47 am; Zomato was down 3 per cent at Rs 83.80, as against a 0.5 per cent decline on the S&P BSE Sensex.
According to a PTI report, the CCI order comes months after the National Restaurant Association of India (NRAI) asked the CCI to investigate the companies for breaching platform neutrality by providing priority to exclusive contractors.
The regulator said that "prima facie there exists a conflict of interest situation, warranting a detailed scrutiny into its impact on the overall competition between the RPs vis-à-vis the private brands/entities which the platforms may be incentivised to favour". CLICK HERE FOR FULL REPORT
In the past three months, Zomato has underperformed the market by falling nearly 40 per cent, as compared to a 0.4 per cent rise on the S&P BSE Sensex.
Zomato is India’s leading foodtech company, with an around 50 per cent market share. It started off as a restaurant search-and- discovery platform, but then ventured into food delivery. Zomato also has a dining-out business, subscription business Pro, and B2B grocery Hyperpure.
Analyst at JP Morgan has ‘overweight’ rating on the stock for four reasons. The brokerage firm expects Average Order Value (AOV) to be sustainable in the medium term as it has a low proportion of premium restaurants.
“We see a reduction in discounts from Zomato as discounts become increasingly merchant funded given rising platform power; Sustainable AOV along with reducing discounts should lead to higher contribution margins; and we see strong long-term growth led by penetration and some increase in frequency among existing cohorts, with Zomato retaining its current share of the food delivery industry with the opportunity to build a quick grocery practice that can expand its TAM,” JP Morgan said in March 24, 2022 report.
(Inputs from Nikita Vashisht)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU