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“Given the intense competitive intensity in the QuickCommerce space, we believe that the path to profitability post the Zomato Group acquisition can be extended by at least one year from FY25 to FY26,” said Swapnil Potdukhe, Analyst Told
, Volatile market environment, relatively cheap valuations of global competitors, investor focus on profitable names and lock-in expiry for pre-IPO investors on July 22 may limit near-term upside for the stock.
The stock, which opened at ₹73, fell as much as 12% from the day’s high before closing at ₹65.85. About 117 million shares were traded on Monday, compared to an average of 43 million shares traded in the previous 10 trading sessions.
On Friday, Zomato’s board approved the acquisition of Blinkit (formerly Grofers) for ₹4,447 crore (about $570 million) in an all-stock deal.
As per the deal, Blinkit shareholders will get around 7% in Zomato at ₹0.76 per share. The transaction implies a 7.4% dilution in Zomato’s existing share capital and is valued at an enterprise value of 8.1 times as of May 2022, similar to its valuation.
Rahul Jain said, “The transaction will have a three-fold impact on Zomato’s earnings such as increase in operating loss to fund Blinkit operations, impact on other earnings in the form of investment in capex for Blinkit operations and 7.4% in equity.” more vulnerable.” VP-Research at Dolat Capital.
Brokerage Jefferies, which has a buy rating and a price target of ₹100 on the stock, said quick trade is growing rapidly but it is in the early stages and the business model is yet to be proven. Blinkit has only been in this business for five months.
agenciesKotak Institutional Equities Post the acquisition announcement, it has downgraded its rating on the stock from ‘buy’ to ‘add’ and lowered the price target from ₹83 to ₹77.
“Given the e-grocer economics, the relatively low-margin nature of the category, the high number of products per order, and the need for a lot of competition are required,” said Kotak analysts Garima Mishra and Shubhangi Nigam. customer note. “With the large upfront investment, we do not see an immediate price increase from the Blinkit acquisition.”
Shares of Zomato, which were listed on July 23, 2021, are down 61% from their all-time high of ₹169 hit on November 16. The stock had gained up to 122% from its issue price of 76.
In a worst-case scenario, Blinkit’s cash burn could reduce Zomato’s valuation by up to 14%, said analyst Pranav Kshatriya.
research. “However, Zomato has enough strength with a cash balance of $1.6 billion to meet this situation.”
VK Vijayakumar, Chief Investment Strategist,
Said this is a segment where profitability is a few years away. “Some of them may do well in the long run. But retail investors are better off chasing solid stocks with strong fundamentals, rather than chasing expectation,” Vijayakumar said. “That’s a bird in hand; e-commerce companies are birds in the bushes.”
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