Zomato Shares Fall 12% After Reported 57% Decline in Profit for December Quarter

Zomato shares plunged 12% after the company's net profit dropped 57.2% for the December quarter. The market cap of the company fell by ₹35,175 crore. Swiggy shares also dropped 10% after Zomato's report indicated a slowdown in the food delivery business.

By Stuti Tiwari Jan 21, 2025, 11:59 IST

Shares of Zomato, the food tech major, plunged 12% in early trading on January 21, 2025, after the company reported a consolidated net profit drop of 57.2% for the December quarter. The company had reported a net profit of ₹59 crore. That is a huge decline from ₹138 crore that it had clocked in the same period last year.

Market Cap of Zomato Erodes by ₹35,175 Crore

The shares of the Gurgaon-based company plunged to ₹212.50 on the Bombay Stock Exchange (BSE), which fell by 11.81% while on the National Stock Exchange (NSE), shares of Zomato were trading at ₹215.80, which marked a decline of 9.99%.

In two days, it has wiped off ₹35,175 crore from Zomato's market capitalisation mcap. At ₹2,04,876.94 crore, the company's costs have also risen sharply, touching ₹5,533 crore, more than double the ₹3,383 crore it spent during this quarter a year ago.

Zomato's Financial Performance: Aggressive Expansion Affects Margins

For the quarter, the revenue from operations of Zomato touched ₹5,405 crore compared with ₹3,288 crore the previous year. However, pressure on the company's margins resulted from its aggressive store expansion in order to support orders on the quick-commerce platform Blinkit.

While the revenues at Zomato were on an uptrend, total expenses surged strongly, causing profit to take a hit. All major revenue drivers were the food delivery segment comprising India food ordering and delivery, hyperpure supplies, (B2B business), and quick commerce.

Swiggy's Shares Also Decline After Zomato's Results

After the report by Zomato, its biggest competitor in the food delivery space, Swiggy, also saw its shares decline by more than 10%. Swiggy's shares fell 10.47% on the BSE, trading at ₹428.85 per share, while on the NSE, the stock dropped by 9.91% to ₹431.70. This marked Swiggy's biggest drop since its listing last year.

Market Overview

The broader market too incurred losses, as the BSE Sensex plummeted 710.60 points at 0.92% to 76,362.84 and the NSE Nifty tumbled 141.85 points at 0.61% to 23,202.90 in morning trade. Food tech, specifically, seems to be battling a strong headwind: both Zomato and Swiggy grapple with an uptick in costs and slowdown.

Zomato's fall in profitability and share price shows the kind of pressure food delivery companies are experiencing amid aggressive expansion and rising costs. The fortunes of both Zomato and Swiggy depend on how these pressures are going to be mitigated in coming quarters.