The Open Network for Digital Commerce (ONDC), the government-backed platform that aims to disrupt the Indian e-commerce landscape has been making waves across social media but still has a long road ahead before it becomes a threat to food delivery platforms like Swiggy and Zomato, according to analysts.
What Is The Goal: The ONDC offers an open-source network that will allow restaurants and other businesses to sell directly to customers without having to go through centralised platforms, which control the entire e-commerce value chain and charge steep commissions.
What Do Analysts Think: Analysts at Motilal Oswal said that at its current scale, ONDC does not pose a significant threat to Zomato’s business unless the new platform scales up in multiple categories, including food, e-commerce, and grocery. This would help it absorb some of the platform’s delivery costs.
Delivery is only free for the first order on the platform, after which the cost has to be borne by restaurants, which is not sustainable, the brokerage said. It also added that in some cases, these fees are higher than those charged by Swiggy and Zomato.
However, the analysts did see some threats to food delivery firms’ take rates in the near term if ONDC does manage to scale up.
Get all the latest Share Market trends and news to set you up for the week ahead.
“If Zomato's take rate rationalisation exercise is slowed down, it could potentially delay the company's timeline for achieving profitability, which remains a key risk at this stage,” the brokerage said in a report.
Meanwhile, analysts at BofA Securities also said that existing food delivery platforms had better tech to optimise delivery times and that it is unlikely that ONDC will capture a large market share in India anytime soon. However, the brokerage said that the positive newsflow around ONDC may keep Zomato’s share price volatile.
Motilal Oswal maintained its ‘buy’ rating on Zomato with a target price of ₹70 while BofA Securities maintained a ‘neutral’ rating on the stock with a target price of ₹72.
Price Action: Zomato’s share price bounced back today going up 2.6% to ₹62.60 in early trade on Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.