Introduction:
On Friday, Zomato’s stock saw a significant increase, with shares going up by 3.70% and hitting a high of Rs 267.35 during the day. This rise happened after the company decided to stop its intercity food delivery service called Legends. This decision was shared by CEO Deepinder Goyal on a social media platform called X.
Launched in August 2022, Legends aimed to connect food enthusiasts with culinary offerings from ten different Indian cities. However, the initiative faced significant hurdles from the outset. By November 2022, Siddharth Jhawar, the project’s lead, resigned, and the service was quietly put on hold by April 2023.
It was briefly relaunched in July with revised strategies, including a minimum order value of Rs 5,000 and a shift to delivering pre-stocked items rather than sourcing directly from restaurants. Despite these adjustments, Legends struggled to achieve the desired market fit.
The closure of Legends is part of Zomato’s broader strategy to streamline operations and focus on core services. Earlier this month, Zomato also discontinued its hyperlocal delivery service, Xtreme, which had been launched in October 2023. Xtreme aimed to facilitate small parcel deliveries but failed to meet performance expectations.
Zomato Stock Soars 4% as Company Shuts Down Legends Service and Expands with Major Acquisition:
In another significant development, Zomato has made headlines for a major acquisition. The company is set to acquire One 97 Communications’ entertainment ticketing business—covering movies, sports, and live events—for Rs 2,048 crore. This move is expected to diversify Zomato’s service offerings and bolster its market presence.
Zomato, founded in 2010, continues to be a dominant player in the online food service industry. With a market capitalization of Rs 2,34,935.52 crore, the company offers a range of services, including food delivery, dining-out options, and loyalty programs.
As of 10:08 AM today, Zomato’s shares were trading 3.14% higher at Rs 265.90 per share, contrasting with a marginal 0.03% increase in the BSE Sensex, which stood at 81,078.14. The stock’s 52-week high is Rs 280, while its 52-week low is Rs 90.08 per share.
Market Analysts’ View:
The surge in Zomato’s stock price reflects investor confidence in the company’s decision to refine its business model by discontinuing less successful ventures. The shutdown of Legends and Xtreme is seen as a strategic move to focus resources on more promising areas and new acquisitions.
The integration of the ticketing business is anticipated to provide Zomato with additional revenue streams and a competitive edge in the entertainment sector.
Conclusion:
Investors and analysts will be closely watching Zomato’s forthcoming financial reports and strategic initiatives, particularly how the integration of the new ticketing business will impact overall growth and profitability.
FAQ:
1. Why did Zomato’s stock price increase today?
- Zomato’s stock price surged by up to 4% after the company announced the discontinuation of its intercity food delivery service, Legends. This decision, announced by CEO Deepinder Goyal, was seen positively by investors as a strategic move to streamline operations and focus on core services.
2. What was the Legends service?
- Launched in August 2022, Legends was an intercity food delivery service aimed at delivering culinary delights from ten cities across India. It faced significant challenges and was relaunched in July 2023 with revised strategies but ultimately did not achieve the desired market fit.
3. Why did Zomato decide to shut down Legends?
- Zomato decided to shut down Legends due to its inability to find a suitable market fit despite various attempts to adjust the service model. The company determined that discontinuing the service would allow them to better allocate resources to more promising ventures.
4. What other recent service changes has Zomato made?
- In addition to shutting down Legends, Zomato also discontinued its hyperlocal delivery service, Xtreme, which was launched in October 2023. Xtreme aimed to facilitate small parcel deliveries but did not meet performance expectations.
5. What recent acquisition has Zomato announced?
- Zomato recently announced the acquisition of One 97 Communications’ entertainment ticketing business for Rs 2,048 crore. This acquisition includes ticketing for movies, sports, and live performances and is expected to diversify Zomato’s service offerings.
6. How has Zomato’s stock performed over the past year?
- Over the past year, Zomato’s stock has experienced a high of Rs 280 and a low of Rs 90.08 per share. As of today, Zomato’s stock is trading at Rs 265.90 per share.
7. What is Zomato’s current market capitalization?
- Zomato’s market capitalization is Rs 2,34,935.52 crore according to the Bombay Stock Exchange (BSE).
8. How does the BSE Sensex relate to Zomato’s stock performance today?
- As of the latest trading, Zomato’s shares were up 3.14%, while the BSE Sensex was only slightly higher by 0.03%. This indicates that Zomato’s stock performance is outperforming the broader market index.
9. What are analysts saying about Zomato’s recent moves?
- Analysts view Zomato’s decision to close non-performing services as a positive step towards refining its business model. The acquisition of the ticketing business is seen as a strategic move to enhance revenue streams and market position.
10. What should investors watch for next with Zomato?
- Investors should keep an eye on Zomato’s upcoming financial reports and how well the company integrates its new ticketing business. Additionally, monitoring how Zomato’s focus on core services and strategic acquisitions impacts its growth and profitability will be important.
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