Swiggy's shares mark worst single-day drop, plummet to 8-week low
What's the story
Swiggy, India's top food delivery platform, saw an 11% fall in its share price today. The decline, which marks the biggest intraday fall since its IPO in November last year, was prompted by dismal financial results from its biggest rival Zomato. The slump took Swiggy's shares to an eight-week low of ₹427 each, close to its IPO price of ₹420/share.
Market reaction
Zomato's weak performance impacts Swiggy's market standing
Zomato's disappointing financial performance for the December quarter also dragged its own share price down. The company's stocks plunged 13.3% to a six-month low of ₹207.80 each, after analysts decided to cut their target price on Zomato in light of these results. The negative market sentiment also reflected on Swiggy, adding to its massive share price fall.
Financial downturn
Zomato's profitability dips due to increased investments
Zomato reported a massive 57.3% year-on-year drop in profitability for Q3 FY25, down to ₹59 crore. This decline was largely attributed to higher investments in opening new dark-stores and acquiring customers in the quick commerce (QC) business. Following these dismal results, analysts have cut their profit after tax (PAT) estimates by 25% for FY25-27.
Perspective
Swiggy's shares seen as more affordable than Zomato's
Despite the recent drop in share price, analysts feel Swiggy's shares are trading at a more affordable rate than Zomato. Global brokerage firm UBS had previously stated that Swiggy's stock is priced at a 35% to 40% discount to Zomato. This valuation perspective could potentially sway investor decisions in the future.