The US-based banking and financial services firm, Goldman Sachs bought into stocks of Hindustan Aeronautics Limited (HAL) and Zomato with collective value worth ₹280.96 crore from the open market, as per numbers disclosed by Bombay Stock Exchange (BSE) on Friday.

The firm bought 3.85 lakh shares of HAL and 60.07 lakh shares of Zomato.

This development comes after the Indian government on Friday signed two contracts worth ₹62,700 crore with HAL for the supply of 156 Light Combat Helicopters (LCH) – Prachand. 

The first contract is for supply of 66 LCHs to the Indian Air Force (IAF) and second is for supply of 90 LCHs to the Indian Army, according to the Ministry of Defence.

On the other hand, Bank of America (BofA) had downgraded its ratings on Zomato and Swiggy just a day before, citing concerns over slowing growth in food delivery and rising competition in quick commerce.

The brokerage has lowered Zomato's rating from ‘buy’ to ‘neutral’ and Swiggy’s from ‘buy’ to ‘underperform’.

Along with the downgrade, BofA has also reduced the target price for both companies. Zomato's target price was cut from ₹300 to ₹250, while Swiggy saw a sharper reduction from ₹420 to ₹325.

Despite these changes, the analysts remain positive about the medium-term prospects of both companies.

According to BofA, the quick-commerce industry, which was earlier seen as a high-growth sector with improving profits, is now facing rising losses and intense competition.

Between the two companies, the brokerage believes Zomato is in a better position due to its scale and first-mover advantage in quick commerce.

Zomato has stronger financials, better profit margins, and a healthier cash position compared to Swiggy, which has been dealing with higher losses in its quick-commerce segment.

BofA also highlighted that as new players enter the market, competition is expected to remain high over the next 12 to 15 months.

Established platforms are expanding into each other's areas, and new entrants are likely to attract customers with higher discounts.

This increased competition could lead to higher marketing expenses, greater platform discounts, and a drop in delivery charges for consumers.

Additionally, operating costs are expected to rise due to higher rental expenses for dark stores and increased wages.

The brokerage does not expect companies to increase platform fees significantly as growth slows. Zomato and Swiggy are investing in their own 10-minute in-house cafe services, leading to slightly higher expenses.

BofA also pointed out that profits from food delivery, which have been a stable revenue source, are being used to cover losses in quick commerce.

In the last 12 months, Zomato’s stock has gained 11.66% but declined 26.6% so far this year. Swiggy stock has also fallen 38.3% so far this year.

(with inputs from syndicated feed)