Motiwal Oswal: ONDC Not an Immediate Threat to Zomato
- ByStartupStory | May 10, 2023
ONDC, the Open Network for Digital Commerce, has been gaining attention recently and could potentially challenge the dominance of food delivery giants Zomato and Swiggy. Social media and news articles have been highlighting the price differences of the same food items on ONDC compared to Swiggy and Zomato, creating buzz online.
Motilal Oswal Securities, a brokerage firm, has stated that ONDC is not an immediate threat to Zomato despite the hype surrounding it. According to the firm, “‘direct ordering’ is not a significant worry for the industry. However, ONDC could pose a threat to Zomato in the future if it expands its reach across different categories and improves its efficiency compared to existing players”.
According to brokerage firm Motilal Oswal, ONDC is not an immediate threat to Zomato, but could become one if it scales up across various categories, including food and ecommerce. The firm noted that while Zomato currently processes 1.8 million orders per day on its own, ONDC only fulfills 10,000 orders. It also stated that the free delivery on ONDC is only available for the first order and is subsidized by the restaurants.
Motiwal Oswal Securities stated that while ONDC’s food pricing is cheaper than Zomato and Swiggy in some cases, it is not enough to outweigh the broader range of food choices available on those platforms. Additionally, the firm mentioned that “after the initial free delivery, ONDC’s delivery fees may be higher than Zomato and Swiggy in some instances”. According to Motilal Oswal, if Zomato’s efforts to reduce its take rate are disrupted, there is a chance that the company’s aim of attaining profitability could be postponed.
During intraday trading on Tuesday (May 9), Zomato’s share price declined by 7% to INR 60.35, amid concerns of potential disruption to the food tech sector from ONDC and Zomato’s pilot of B2B delivery services. Furthermore, Invesco, which is a significant investor in Swiggy, has decreased its valuation by 50% to approximately $5.5 Bn, adding to the worries in the industry.
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