Zomato Shares Surge 3% Following Shutdown of Intercity Legends Service

Zomato’s stock rises over 3% as the company discontinues its Intercity Legends service, focusing on new growth areas.

Zomato’s share price jumped by more than 3% on August 23, 2024, following the company’s announcement to shut down its Intercity Legends service. The service, launched in 2022 to deliver iconic dishes from various cities across India, failed to find a sustainable product-market fit despite attempts to adjust its model for profitability. Zomato CEO Deepinder Goyal confirmed the immediate cessation of the service in a post on the microblogging platform X, citing these challenges.

The closure of Intercity Legends coincides with Zomato's recent strategic moves, including the acquisition of Paytm’s entertainment and ticketing business for ₹2,048 crore. This acquisition will be included into the 'District' app, a new software designed to improve Zomato's 'going-out' category. With a projected increase in Zomato's gross order value (GOV) from ₹5,000 crore to ₹7,000 crore and a predicted GOV of ₹10,000 crore by FY2026, analysts see this purchase as a possible growth driver.

Positive sentiment regarding the deal has been expressed by Morgan Stanley, which indicates that Zomato's adjusted EBITDA expectations for FY2027 and beyond may benefit significantly from the acquisition. The company's target price for Zomato shares is ₹278. It retains a 'Overweight' rating on the stock.