Zomato, Swiggy Shares Plunge Amid Profit Decline and Rising Competition
Shares of Zomato Ltd. (ZOMATO.BO) and Swiggy Ltd. (SWIGGY.BO) have plummeted after both companies reported disappointing financial results and warned of intensifying competition.
Zomato Profit Declines, Warns of Losses
Zomato's shares fell to a six-month low after the company reported a 57% decline in net income for the December quarter. Revenue increased 64%, but heightened competition in the rapid commerce segment halted margin expansion. The company warned of further losses due to competition from rivals such as Swiggy and Zepto.
Swiggy Shares Fall on Rival's Performance
Swiggy's shares dropped by a record 11% in Mumbai, reflecting the poor performance of the sector leader. Analyst Rahul Jain from Dolat Capital Market Ltd. noted that Zomato's weak performance had impacted Swiggy's food delivery and quick commerce businesses.
Outlook and Future Plans
Zomato remains committed to growing its food delivery business at 20% annually but has provided a cautious outlook for the near term. The company plans to continue store expansion but acknowledges that underutilized stores may impact profits in the coming quarters.
Investment and Expansion
Despite Zomato's recent financial challenges, it raised $1 billion via institutional share placement in November to expand its quick commerce business, Blinkit.
Market Impact and Performance
Zomato's shares have declined by approximately 20% in 2023. Swiggy's shares have also taken a hit, following a more than four-fold surge over the previous two years. This decline highlights the challenges faced by food delivery and quick commerce companies amid increasing competition.