Zomato share price gained over 3% on Friday after the company announced to shut down its Intercity Legends services. Zomato shares rose as much as 3.68% to ₹267.30 apiece on the BSE.
Zomato CEO Deepinder Goyal on Thursday announced to immediately shut down the Intercity Legends services for ‘not finding product market fit’.
“Update on Zomato Legends - after two years of trying, not finding product market fit, we have decided to shut down the service with immediate effect,” Goyal in a post on microblogging platform ‘X’.
Zomato Legends, which made a debut in 2022, offered iconic dishes from 10 cities to other parts of the country. In July 2024, the online food delivery giant had temporarily paused the service and restarted it with a few changes to make orders more profitable.
The development comes a day after Zomato announced the acquisition of Paytm’s entertainment and ticketing business for ₹2,048 crore to scale up its ‘going- out’ segment. Zomato will spin off the new business into a new app called ‘District’.
Analysts believe the acquisition gives size and scale to Zomato’s ‘going out’ business, acting as an additional growth engine over the medium-to-long term.
Morgan Stanley views this proposed transaction as positive for Zomato and believes that there could be upside risks to its adjusted EBITDA forecasts for FY2027 and beyond if execution in this segment remains strong.
Zomato’s Q1FY25 GOV run rate was ₹5,000 crore and with this acquisition it will be ₹7,000 crore; the company expects FY2026 GOV of at least ₹10,000 crore in the combined business. Zomato is acquiring a profitable and asset-light business (positive working capital. though). Over time, Zomato expects this business to make adjusted EBITDA margins of 4-5% versus 1.5% currently in FY2024 for acquired business, Morgan Stanley noted.
The foreign brokerage firm has an ‘Oveweight’ rating on Zomato shares and a target price of ₹278 apiece.
At 10:05 am, Zomato shares were trading 3.30% higher at ₹266.30 apiece on the BSE.
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