SUMMARY
Shares of Zomato rose on Tuesday, May 24, 2022, and were trading at INR 67.05 apiece at 09:38 AM
The company has reported that its net loss had widened to INR 1,222.5 Cr for FY22 and INR 359.7 Cr for Q4 FY22
UBS and Morgan Stanley have put a target price of INR 130 - INR 135 per share, rating that the stock has better future prospects
Foodtech giant zomato
has declared its Q4 results on Monday, May 23, 2022, post which, its share price opened at 4% positive on May 24, 2022. On the first day of the week, company stock rose over 2%, reaching an intraday high of INR 59.55 before giving up some of the gains. The day closed at a price of INR 57 and opened at INR 59, Tuesday, today.
It is currently on a continuous rise and was trading at INR 67.05 at 09:38 AM, despite the downward trend shown in the financials.
The company reported that its net loss for FY22 and Q4 FY22 had widened to INR 1,222.5 Cr and INR 359.7 Cr respectively. This is a 49.74% year-on-year (YoY) increase in its net loss, while the loss rose 435.27% YoY during the January-March quarter.
It is to be noted that since its listing in July 2021- when the share opened at a 53% premium at a market cap of INR 1 Lakh Cr – Zomato has wiped over 50% of the investor money.
The loss-making company has banked on the acquisition of new customers, its quick commerce pilot with Zomato Instant and various subsidiaries and partnerships and including BlinkIt, CureFit, Shiprocket, others.
Where Is Zomato Burning Cash Despite Revenue Growth?
In FY22, Zomato posted revenue of INR 4,192.4 Cr. But the company has listed down several cash-burning avenues, including increased fuel prices putting a dent in the delivery costs.
Increased inflation, rising interest rates, the war in Russia and Ukraine, market volatility and the company’s high ESOP expenses have also meant that the company is paying for operations out of its pockets. Further, poaching of delivery workers by rival quick commerce and delivery companies means a greater employee turnaround.
The company, in FY22, has also invested in several loss-making companies such as BlinkIt, Shiprocket, and Magicpin. Further, it announced plans to take on an NBFC licence to provide loans to delivery partners and burnt cash on a failed pilot of its quick commerce vertical Zomato Instant.
Zomato founder and CEO Deepinder Goyal stated that the company saw low quarter growth in Q3 FY22 as dining-out and travel opened up post-Covid. But that was a one-time correction in the growth trajectory, he added.
To that, Zomato announced that the gross order value (GOV) of the startup’s food delivery business grew by 6% QoQ and 77% YoY to reach INR 5,850 Cr in Q4 FY22.
The average order value (AOV) remained almost the same in FY22 at INR 398 as against INR 397 in FY21. For the top eight cities, the AOV grew by 3% in FY22 over FY21.
The food delivery app launched its operations in more than 300 new cities in Q4 FY22, but these cities added only around 0.2% to its GOV.
Post the financial results announcements, broking research firm UBS maintained a buy rating on Zomatp shares with a target price of INR 130 per share. On the other hand, Morgan Stanley has rated the stock as overweight (i.e believes the company’s stock price should perform better in the future) with a target of INR 135 per share.
