The government’s Open Network for Digital Commerce (ONDC) has positioned itself as a potential challenger to the Swiggy-Zomato duopoly in India’s food delivery market. However, experts at Kotak Institutional Equities believe that the impact of ONDC on the two incumbents will be limited in the near term, according to a report by the brokerage firm.

Kotak maintained a ‘buy’ rating on Zomato, stating that the media coverage around ONDC would not significantly affect the company. The brokerage firm highlighted that ordering food through ONDC appeared to be cheaper in some cases due to ONDC-funded discounts. However, if these discounts were excluded, there were instances where ordering from Zomato and Swiggy would have been more cost-effective for customers.

Kotak also expressed concerns about the sustainability of the INR 50 discount offered by ONDC, as the network may not have a large budget to fund discounts in the future. They noted that ONDC had already started removing the discount for repeat customers. The report emphasized that Zomato’s large scale, cost competitiveness, and reasonable margin profile could help it withstand the impact of ONDC in the near term, although the long-term effects remained uncertain due to the dynamic nature of the market.

The brokerage firm further highlighted the differences between ONDC and Zomato. They pointed out that ONDC’s third-party dependent delivery model may excel in the 60-120 minute delivery window but could struggle in the 30-45 minute timeframe. Zomato’s extensive network of riders, with around 330,000 average active monthly riders in Q3 FY23, gives it an advantage over ONDC’s partners like Shadowfax and Dunzo.

Kotak also noted that ONDC has yet to invest in customer experience to match that of Zomato and Swiggy, and it will need to do so in order to compete. As ONDC-funded couponing gradually fades out, the pricing differential between the two platforms may decrease.

The optimism towards Zomato from Kotak Institutional Securities aligns with a similar opinion expressed by Motilal Oswal. In recent weeks, food delivery through ONDC has gained significant traction, with major media outlets and influencers reporting on the price differences between ONDC and Zomato or Swiggy.

The government’s Open Network for Digital Commerce (ONDC) has positioned itself as a potential challenger to the Swiggy-Zomato duopoly in India’s food delivery market. However, experts at Kotak Institutional Equities believe that the impact of ONDC on the two incumbents will be limited in the near term, according to a report by the brokerage firm.

Kotak maintained a ‘buy’ rating on Zomato, stating that the media coverage around ONDC would not significantly affect the company. The brokerage firm highlighted that ordering food through ONDC appeared to be cheaper in some cases due to ONDC-funded discounts. However, if these discounts were excluded, there were instances where ordering from Zomato and Swiggy would have been more cost-effective for customers.

Kotak also expressed concerns about the sustainability of the INR 50 discount offered by ONDC, as the network may not have a large budget to fund discounts in the future. They noted that ONDC had already started removing the discount for repeat customers. The report emphasized that Zomato’s large scale, cost competitiveness, and reasonable margin profile could help it withstand the impact of ONDC in the near term, although the long-term effects remained uncertain due to the dynamic nature of the market.

The brokerage firm further highlighted the differences between ONDC and Zomato. They pointed out that ONDC’s third-party dependent delivery model may excel in the 60-120 minute delivery window but could struggle in the 30-45 minute timeframe. Zomato’s extensive network of riders, with around 330,000 average active monthly riders in Q3 FY23, gives it an advantage over ONDC’s partners like Shadowfax and Dunzo.

Kotak also noted that ONDC has yet to invest in customer experience to match that of Zomato and Swiggy, and it will need to do so in order to compete. As ONDC-funded couponing gradually fades out, the pricing differential between the two platforms may decrease.

The optimism towards Zomato from Kotak Institutional Securities aligns with a similar opinion expressed by Motilal Oswal. In recent weeks, food delivery through ONDC has gained significant traction, with major media outlets and influencers reporting on the price differences between ONDC and Zomato or Swiggy.