Zomato shares plunge 10% on large deals, continues 3-day losing streak

Zomato stock settled at ₹53.60 apiece down by 9.08% on BSE. The stock has shed about 9.8% with an intraday low of ₹53.15 apiece earlier in the trading session.

At the current market price, Zomato’s market cap is over ₹45,837 crore.

On BSE, large deals exchanged hands at intervals on Friday.

As per BSE data, right when the market opened at 9.15 am, 159,127 equity shares exchanged hands in Zomato, followed by another bulk exchange of 147,182 equity shares at around 9.19 am and 138,160 equity shares at 9.23 am. That was not it, a large volume of 186,984 equity shares exchanged hands at 9.49 am. Also, another 102,931 equity shares exchanged hands at around 11.29 am, followed by another large volume of 102,235 equity shares at around 1.30 pm. Around 2.09 pm, a whopping 165,025 shares and 163,500 shares also exchanged hands in Zomato shares.

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Overall, on BSE, by end of market hours on December 23, a total of 73,53,511 equity shares exchanged hands in Zomato stock.

The details of the buyers and sellers were not known immediately.

On NSE, Zomato shares closed at ₹54.05 apiece down by 8.31%. The traded volume as of December 23 was around 9,29,74,114 equity shares in the company.

Recently, Jefferies rejigged its India model portfolio in which the brokerage has shifted weight from Bharti Airtel, Zomato, and Maruti Suzuki into Larsen and Toubro (L&T), Reliance Industries Ltd (RIL) and Banks.

However, earlier this month in a report dated December 4th, Jefferies had set a ‘buy’ recommendation on Zomato for a target price of ₹100 per share.

Jefferies in that report highlighted that tough times have changed the focus and brought acute focus on cash flow across start-ups. Zomato management has also accelerated its journey towards better unit economics. Management is targeting Ebitda break-even (ex-Blinkit) by Mar’23 or latest by Sep’23 – this would be led by better profits in food delivery. The company was already cashflow positive in 2QFY23 (incl. treasury income).

Also, Zomato management is confident of turning Blinkt’s adjusted EBITDA positive in 2 years.

Further, Jefferies note stated that management focus is on driving growth along with loss reduction, with an acute focus on a lean cost structure. MTUs are expected to drive growth in the coming quarters, driven by better conversion of ATU into MTU and new customer adds. Unlike in the past when Zomato intended to invest across multiple businesses, the company now intends to conserve cash. The company has internally upped the ambition on profitability and will now look to achieve 4-5% adj Ebitda margins (% GOV) in the medium term, implying c8% contribution margin (cf. 4.5% now).

On the valuation, Jefferies note said, “We also see a consistent improvement in profitability in food delivery despite strong 30% Cagr over FY22-25E (well ahead of global/regional peers).”

In Q2FY23, the company’s consolidated net loss narrowed to ₹251 crore compared to a loss of ₹430 crore in the same period a year ago. Also, consolidated revenue from operations climbed by 62.2% to ₹1,661 crore in Q2FY23 versus ₹1,661 crore in Q2FY22. Zomato completed the acquisition of Blinkit in August.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.