Why Zomato Share Price is Falling

Zomato, one of India's leading food delivery companies, is currently in the spotlight. The company is undergoing a major transformation as shareholders have approved changing its parent company's name to Eternal Limited.

This shift is part of Zomato's broader vision to move beyond food delivery and establish itself as a diversified business. The new name officially came into effect on 10 March 2025.

The rebranding aligns with Zomato's expansion into multiple sectors. It now operates Blinkit, a quick-commerce platform for instant grocery and essentials delivery. It also runs Hyperpure, a B2B supply chain service for restaurant ingredients.

Additionally, Zomato Live/District focuses on live events and entertainment. With this new identity, Zomato aims to position itself as a multi-vertical company rather than just a food aggregator.

Apart from this, Zomato is also under investor scrutiny as its share price is tumbling quickly.

Over the last five days, its share price has crashed 10.2%, making headlines in the stock market.

Let's take a closer look at why Zomato share price is falling.

#1 Blinkit Expansion

Zomato is aggressively expanding its quick commerce business, Blinkit. The management aims to double Blinkit's store count to 2,000 by December 2025.

This rapid expansion has increased investment costs, leading to higher losses for Blinkit and squeezing Zomato's net profit in Q3.

The company expects Blinkit to remain loss-making in the near term, even though it now aims to break even by December 2025, a year earlier than its previous projection.

The quick commerce industry has become highly competitive, with new entrants and existing players ramping up operations. Companies are offering deep discounts and running promotional campaigns to attract customers. These strategies are putting pressure on Zomato's profitability.

#2 Growing Competition

The quick commerce industry is witnessing intense competition, with several companies aggressively expanding their operations. Both new entrants and established players are increasing their store count and enhancing delivery speeds to capture a larger market share.

To attract customers, companies are offering deep discounts and frequent promotional deals, making profitability a challenge for all industry participants, including Zomato.

As competition heats up, Zomato's Blinkit faces increasing pressure to maintain its customer base. The company must continue investing in expansion while also responding to price wars.

This puts a strain on Zomato's financials, as heavy discounting directly impacts profit margins. With competitors showing no signs of slowing down, the pressure on profits remains high.

Investors had anticipated strong revenue growth and steady improvements in profitability. However, the ongoing price wars and rising operational expenses have forced analysts to downgrade Zomato's earnings forecasts. The market's response has been swift, with Zomato share price facing a decline.

If competitive intensity remains high, the company may have to increase its spending further, delaying its path to profitability and keeping investor sentiment under pressure.

#3 Antitrust Allegations

Zomato, along with competitors Swiggy and Zepto, is under scrutiny due to antitrust allegations.

The All India Consumer Products Distributors Federation (AICPDF), representing 400,000 FMCG distributors, has filed a complaint with the Competition Commission of India (CCI). The complaint accuses these quick commerce firms of deep discounting and predatory pricing practices.

AICPDF's complaint includes detailed price comparisons between quick commerce platforms and traditional kirana stores. The federation claims that such discounting has led to the closure of over 200,000 local retail shops across 75-80 cities.

They have also proposed setting a minimum discount limit of 10% on the maximum retail price (MRP) of FMCG products to create a level playing field.

These allegations have raised concerns among investors about Zomato's business practices and potential regulatory repercussions. The uncertainty surrounding the outcome of the CCI investigation has contributed to a decline in Zomato's share price.

Investors fear that any adverse findings could lead to penalties or operational restrictions, further impacting the company's profitability.

What Next?

Zomato is rapidly expansion and profitability in its quick commerce business. Store additions are progressing steadily, but the pace may fluctuate due to external factors like licensing approvals.

Blinkit is also expanding. The company is now a leading player in major metros, except Chennai and Hyderabad, and is pushing into smaller cities to test scalability.

To improve profitability, Zomato is working on enhancing store efficiency and expanding high-value product categories. It has introduced electronics, beauty, and toys, which showed good demand.

Despite competition, Blinkit's average order value (AOV) is rising, suggesting customers are shifting towards higher-value purchases.

Zomato has also announced an up to US$ 1 billion (bn) capital raise, subject to shareholder approval. The company insists this is to strengthen its balance sheet, not for aggressive discounting.

While competition is rising, Zomato says it's focusing on service quality and operational efficiency rather than price wars.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

How Zomato Share Price has Performed Recently

In the past five days, Zomato share price tumbled 10.2%. In the last month, it is down 3.5%.

In the last six months its share price is down 23.5%. The stock has rallied 34.3% in the past year.

The stock touched its 52-week high of Rs 304.5 on 5 December 2024 and a 52-week low of Rs 144.3 on 14 March 2024.

About Zomato

Zomato was incorporated in the year 2010. The company, during its initial stages, started off as a restaurant finder.

Following in the footsteps of its competitor, Swiggy, the company formally launched its food delivery service in India in the year 2015.

By 2020, Zomato expanded its food delivery business to over 500 cities, facing stiff competition from both Swiggy and Uber Eats.

However, during the same year, the company acquired Uber Eats to consolidate its position in the food delivery space.

For more details, check out Zomato company fact sheet and quarterly results.

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