Zomato share price gains 8% on large block deal

Zomato’s share price gained 8 percent in the morning trade on April 25 following a large block deal in which 1.5 crore shares, or 0.2 percent of equity, worth Rs 88.2 crore changed hands at an average price of Rs 59 a share. The details of the buyers and sellers were not immediately known.

Recently, global investment bank Citi gave a “buy” rating to the food-delivery firm, setting a target price of Rs 76, a potential 35 percent upside from the current levels.

Dining-out gains

Zomato and Swiggy have introduced monetisation in the dining-out segment and it was positive in the medium term, Citi said.

“In Q3 we saw around 10 percent decline in the food delivery orders and prior to that quarter also there was modest growth,” said Rahul Jain, Vice President, Research, Dolat Capital.

The trend indicated that post-Covid, consumers were resetting their mindset and showing a greater demand for the dine-out model, he said.

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“But if you see from a pure commercial perspective, what kind of revenue, cost and profit it can add, with its current contribution being small, any growth on this front wouldn’t make any delta, it’s just a small incremental effort,” Jain said.

He said the trend of consumers aligning their behaviour due to Covid was see over the last two to three quarters, and has been factored into the share price.

In terms of investment perspective, Jain does not consider this to be a significant angle to consider but also states that everything small adds up.

Domestic brokerage, Motilal Oswal which initiated coverage on the stock last week with a “buy” rating and a target price of Rs 70 expects strong growth to be complemented by the company turning profitable over FY25 despite the elevated competitive intensity.

Also Read: Daily Voice | IT sector might start heading back to long-term growth trajectory by end of FY24, says this fund manager

Recently, the company’s more than 100 Blinkit stores were closed across Delhi-NCR as delivery executives protested a change in payment structure. The stores have since resumed operations, the company said.

At 11.58 am, the scrip was trading 5.45 percent higher on the National Stock Exchange at Rs 59.05, while the benchmark Nifty was up 0.23 percent at 17,784.05.

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