Shares of online food delivery aggregator Zomato tumbled 6 percent in Tuesday's (May 9) trade, a day after Invesco slashed Swiggy's valuation to $5.5 billion from $8.2 billion. This is Invesco's second valuation markdown for Swiggy in less than a year. Back in April, the fund had reduced the investee company's valuation to $8.2 billion from $10.7 billion.

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The Deepinder Goyal-led company's shares opened downside today, May 9, and went on to hit an intraday low of Rs 60.35 apiece from its Monday (May 8) closing of Rs 64.90 apiece on the National Stock Exchange (NSE). The stock was trading 6.01 percent lower at Rs 60.99 apiece during late noon deals. This is the third consecutive day of decline in Zomato shares.

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Market experts believe that the shares of Zomato have witnessed sharp sell-off today due to the Invesco-Swiggy row and investors are also weighing the impact of Open Network for Digital Commerce (ONDC) on the prospects of the food delivery services platform.

'Buy on dips'

"As Invesco has downgraded Swiggy, it has majorly affected Zomato also, but only for short term. If we see in the long-term perspective, it will serve as a positive for the company. So, buy on dips. Advisable near 55 levels for a target of Rs 84. Stop loss at Rs 49," said Ravi Singhal CEO Of GCL Broking.

Meanwhile, Capital Mind Founder Deepak Shenoy believes that it is way too early to take a call on whether ONDC will affect the businesses of Zomato and Swiggy. "Of course, it is a challenge. It is a threat," Shenoy, however, acknowledged.

Zomato, which is Swiggy's key competitor, has seen its market capitalisation slip by about 50 percent since listing in mid-2021. The company's current market capitalisation stands at $6.8 billion.

However, in January, when Invesco had slashed Swiggy's valuation, Zomato's market cap was much lower and hovered between $5.5-6 billion.

Invesco has implied that it observes other "market participants" in determining the fair value of its holdings in a portfolio startup, according to reports.

"Zomato share price may correct further to touch the levels of 58 in the coming trading sessions. The selling pressure in Zomato has triggered in anticipation due to the recent valuations cut of Swiggy by the Invesvo, said Ravi Singh, Vice President and Head of Research at Share India.

The Zomato stock has an average broker target of Rs 65, implying a potential upside of 6.3 percent, according to data from Trendlyne. Brokerage firms remain positive on Zomato shares, which has been struggling since the end of the year 2021 after the initial euphoria over the loss-making and cash-burning new-age internet companies fizzled out and the central bank pumped out the easy money from the economy.

First Published:May 9, 2023 4:05 PM IST