Zomato shares continued to tumble on Thursday, marking its fourth consecutive session of fall. Know why are Zomato stocks falling
Zomato Stock Price: Zomato shares continued to tumble on Thursday, marking its fourth consecutive session of fall. The stock of the food delivery giant has slumped about 25 per cent since Monday after the company acquired the quick commerce delivery firm Blinkit for Rs 4,447.5 crore in an all-stock deal.
From a startup that sought to solve the ‘hunger’ problem to becoming the first Indian unicorn to enter public markets, Zomato’s journey so far has been a topsy-turvy ride.
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The food-delivery company’s listing on Indian share markets opened opportunities for a bunch of young startups. Back in 2021, when Zomato was listed as a public company, everybody welcomed it with great euphoria. It didn’t take much time before the company started to face headwinds and faced the volatility of the market.
The latest round of correction has wiped out Rs 11,680 crore from investors’ kitty as its market capitalisation slipped to Rs 35,686 crore from Rs 47,366 crore in four days.
Stock Price History
Currently, shares of Zomato are 28 per cent below the issue price of Rs 76, whereas the counter has taken a big hit of 67 per cent from its 52-week high of Rs 169.10 hit in November 2021.
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What Do Analysts Say?
Explaining Blinkit’s relevance to Zomato’s business, founder and CEO Deepinder Goyal stated that Blinkit, just like food delivery, is also a hyperlocal business and caters to the need for quick delivery of products for customers.
Though several equity research firms and their analysts said that the deal would add to Zomato’s business in the longer run, the decline in share prices indicates that investors are not so confident about the acquisition adding value to the business.
As per analysts, Zomato adding another loss-making company to its portfolio has hurt investors’ sentiment. The possibility of a higher cash burn has also made the investors cautious.
Meanwhile, Kotak Institutional Equities Research has already downgraded the stock to ‘add’ from ‘buy’ and cut the fair value estimate to INR 77 from INR 83. “We believe Blinkit will require investments beyond the $400 Mn envisaged by Zomato given rising competitive intensity,” the research firm added.
