Zomato shares tank 5% after CCI orders probe into unfair business practices

Shares of food aggregator Zomato slipped 5 per cent to hit an intraday low of Rs 82.15 on BSE after the Competition Commission of India (CCI) ordered a probe into the operations and business models of food delivery majors, Swiggy and Zomato pertaining to alleged violations of Section 3(1) and 3(4) of the Competition Act.

The CCI, in its order dated April 4, 2022, stated that there exists a prima facie case with respect to some of the conduct of Zomato and Swiggy, which requires an investigation by the Director General (‘DG’), to determine whether the conduct of these companies have resulted in contravention of the provisions of Section 3(1) 3(4) of the Competition Act.

The stock opened 4 per cent lower at Rs 82.75 against the previous close of Rs 86.20. With a market capitalisation of Rs 66,360 crore, the shares stand higher than 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.

On a year-to-date basis, the shares have fallen over 38 per cent. Of late, the shares of all the new-age Internet companies have been under tremendous selling pressure.

Currently, the stock is down over 49 per cent below its all-time high. It touched an all-time high of Rs 169.10 on November 16, 2021.

The probe is a response to a complaint filed by the National Restaurant Association of India (NRAI) with respect to alleged anti-competitive practices by Swiggy, Zomato, which as per the association’s plea commands more than 90 per cent market share of food delivery industry in India.

The NRAI had alleged that these online food aggregators indulge in deep discounting, exclusive tie-ups and preferential treatments of restaurant partners in violation of the country’s competition rules, which also impacts the business of restaurants as well as inhibits the entry of new players into the market.

Zomato made a bumper debut on bourses with the unicorn hitting the Rs 1-lakh crore market capitalisation mark. The stock opened at Rs 116, 52.63 per cent higher on NSE against the issue price of Rs 76.
Tanya Aneja