Eternal, Swiggy drop as Rapido undercuts food delivery commission
Shares of
Zomato
parent
Eternal
and its duopolistic rival
Swiggy
dropped as much as 2.5% and 4% on Monday as
Rapido undercut them
in commissions levied from restaurants. The unlisted ride-hailing platform is looking to foray in the
food delivery
space.
Eternal shares closed 1.86% lower on BSE at Rs 256.99 per share, after hitting an intraday low of Rs 255.35. Prosus-backed
Swiggy
ended the day's trade 2.79% lower at Rs 364 a share, falling to Rs 360.10 apiece earlier in the day. The benchmark Sensex closed 0.31% higher at 82,445.21.
The drop in shares comes after
Rapido
began partnerships with restaurants for its online food delivery service at nearly 50% lower commissions than Swiggy and Zomato.
According to the agreed-upon terms with the industry body National Restaurants Association of India (NRAI), Rapido will charge a flat commission of Rs 25 for all orders below Rs 400, and Rs 50 for orders worth more than Rs 400. This translates to 8–15% of commission from restaurants, compared to 16–30% that
Zomato
and Swiggy charge, as ET reported.
Recent months have seen multiple small restaurant owners calling out what they alleged are "steep charges" levied by Zomato and Swiggy. "Zomato is becoming unsustainable for small restaurant owners like us," Vandit Malik, founder of The Garlic Bread, wrote on LinkedIn three weeks back. "To even be visible on the platform, I'm forced to spend Rs 30+ per order on ads. What's left? Pennies. Sometimes, not even that," he alleged.
The owners of another NCR-based small restaurant, Saffroma, wrote on X last week, which went viral, that it was quitting Zomato, alleging "zero payouts, mystery service charges and advertisements initiated without approval." The post has since been deleted.
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Food delivery outlook
India's online food delivery market is expected to more than double to $15 billion by March 2029, according to a December 18 report by JM Financial. Platforms had penetrated only about 11% of the country's total food consumption in 2023, compared with 40% in China and 58% in the US, it said.
In a note dated June 2, Global financial services firm Morgan Stanley picked Deepinder Goyal-led Eternal as its top investment pick in the Indian food delivery sector, citing market leadership in both quick commerce and food delivery, healthy unit economics, stronger balance sheet than peers, and sound risk-reward.
It kept its
target price for Eternal
's stock at Rs 320 per share, implying a potential upside of 24.5% from the stock's current price.
Initiating coverage on Swiggy
earlier this month, the brokerage firm pegged its target price for the stock at Rs 405 per share, marking a potential upside of 11.3%.
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