Shares of food delivery players Swiggy and Zomato-parent Eternal are sharply lower by 2-1/2 percent each on June 9, after multiple news reports suggested that cab-hailing platform Rapido is set to enter the business with significantly lower commission charges compared its more established rivals, further increasing competition.
Rapido has begun onboarding restaurants for the pilot project and is offering a flat commission charge of Rs 25 on all orders below Rs 400, and Rs 50 for orders worth more than Rs 400, CNBC-TV18 reported citing people familiar with the development. This implies a commission in the range of 8-15 percent, significantly lower than the 15-30 percent commission charged by Swiggy and Zomato.
Rapido has further asked its partner restaurants to offer items worth as low as Rs 150, with discounts being limited to only those being agreed upon with the restaurants, one report said citing sources.
Moneycontrol couldn’t independently verify the details of the report yet.
Notably, this comes at a time when customers and restaurants are increasingly complaining against high delivery and commission fees charged by both the food delivery giants who currently hold a duopoly over the market.
Recently, a Noida-based restaurant owner took to X to publicly quit Zomato, criticizing its zero payouts and 'mystery service charges'.
"Dear Zomato, Deepinder Goyal, I'm finally pulling my restaurant off your platform," Manish Kumar, husband of Soni Devi who owns Saffroma in Sector 26, wrote on X. "Congrats! Your mystery service charges, surprise ad placements (without consent), and a POC who ghosts like it's a talent show—truly inspiring. Small outlets deserve better. Quality is greater than commissions," he wrote.
Responding to the incident, Zomato told Moneycontrol that all their marketing collaborations, such as ads, promotions, and discounts, etc., as well as commercials, are mutually discussed with their restaurant partners before being switched on, switched off or modified.
Swiggy shares dropped by 2.5 percent in the afternoon, while Zomato shares fell close to 2 percent, snapping their respective three-day gaining streaks.
Earlier this month, Morgan Stanley reiterated that Eternal was its top pick in the space, citing the company's leadership in both food delivery and quick commerce, efficient cost structure, and a strong balance sheet that reduces the risk of further equity dilution. The brokerage maintained its target price of Rs 320 per share for Eternal's stock, implying a 33 percent upside potential of nearly 24.5 percent from the stock’s current level.
On June 4, Morgan Stanley initiated coverage on Swiggy with an 'overweight' rating and a target price of Rs 405 per share. This implies an upside potential of nearly 11 percent from the current level.
The two rivals together added a whopping Rs 30,590 crore ($3.6 billion) in market capitalisation in just five trading sessions during the previous week.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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