With the new labour code coming into force, the shares of Zomato and Swiggy witnessed a shortfall by 2 percent on early Monday trade. It’s raising concerns over higher operating costs for platform companies.
However, both stocks recovered as brokerages indicated that the long-term financial impact is likely to be limited. By 10:15 am, Zomato (Eternal) stock was down just 0.3 percent at Rs 301, while Swiggy traded up 1.2 percent at Rs 390.
Cost of food delivery set to rise.
Brokerages have quantified the estimated cost implications for food-delivery and quick-commerce firms following mandatory social-security contributions for gig and platform workers under the new codes. As per Analysts a slight increase in delivery fees cannot be ruled out for customers as platforms adapt to the additional statutory outgo.
According to Morgan Stanley the reforms could increase
Employer-worker costs and weigh on near-term sentiment, adding that aggregators must contribute 1-2 percent of revenue to the employer-worker welfare fund. This translates to Rs 1.5-2.5 per order across food delivery and quick commerce, with a 4-10 percent impact on adjusted EBITDA for major online segments. But impact to be limited, shared across the chain
However, the brokerage added that the burden is likely to be shared across platforms, workers and consumers, easing the pressure on company margins. Separately, both Zomato and Swiggy also said that they see no material long-term impact on their businesses.
News Edit KV Raman
