Shares of Zomato and Swiggy continued their downward slide on January 22, dropping by another 3 percent amid concerns over intensifying competition in the quick commerce space. Zomato’s aggressive push to expand its dark store network for its quick commerce arm, Blinkit, has raised apprehensions about rising costs and shrinking profits for the sector.
Zomato’s expansion efforts for Blinkit have driven up investment costs, significantly increasing losses in its quick commerce vertical and affecting the company’s overall profitability. While some brokerages have lauded Zomato’s bold strategy, others, such as Jefferies, noted that such moves might trigger a competitive response from rivals, further straining the industry.
This has taken a toll on the stocks. Zomato has lost 17% in three sessions, while Swiggy has shed 11% in two days.
For November-end listings, Swiggy started with the NSE list at a Rs 420 issue price premium saw a strong front-line rally post-listing where the stock ran as high as to Rs 617. The stock however, has slid in the sell-off to move around issue price levels again and fell in intraday dealings to Rs 424.65 against the previous close of Rs 430.5 on January 22. A stock of peer Zomato declined further down to Rs 203.85 earlier in the day.
Investors are now closely watching the sector, as heightened competition and increased spending could challenge profitability in the near term.
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Source: Moneycontrol
News Desk
