Zomato's Disappointing Q3 Earnings: Competition Heats Up
Shares of quick commerce players--Swiggy and Zomato extended losses and dropped another 3 percent on January 22 amid growing concerns over intensifying competition in the sector. These concerns gathered momentum after Zomato's sharp profit decline in Q3 as the food delivery aggregator chose to take on an aggressive dark store expansion plan for its quick commerce business-Blinkit.
This dampened spirits for the food-delivery and quick commerce sector where the two firms--Swiggy and Zomato--mostly hold a duopoly in terms of market share.
Zomato hopped on an aggressive store expansion spree for Blinkit which drove up investment costs, inflating the the quick commerce vertical's losses and squeezing the company's overall net profit in Q3. While several brokerages commended Zomato's aggressive take on store expansion, Jefferies also noted that it may also prompt competitors to follow suit.
Amid these concerns, shares of Zomato have tanked 17 percent in three consecutive sessions while those of Swiggy lost 11 percent in two days.
The recent downturn in Swiggy's shares have also taken the stock at a kissing distance of its listing price. The stock had listed with a 7.69 percent premium at Rs 420 per share on the NSE on November 13. The stock saw a significant surge after that, rising as much as 32 percent to Rs 617 per share.
As of today's session, shares of Swiggy hit an intraday low of Rs 424.65 while those of Zomato slipped to Rs 203.85.
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