Zomato, Paytm Shares Fall, Delhivery Rises Over 6% Amid Contrasting Views Of Brokerages

Shares of foodtech giant Zomato fell 3.49% on Thursday (June 2) to close at INR 72 on the BSE, falling for the second consecutive session.

The stock opened in the red at INR 74.55 and continued to fall throughout the day. Shares of Zomato have rallied more than 38% in the last 20 days.

The startup’s net loss widened to INR 1,222.5 Cr in FY22 from INR 816.4 Cr in FY21. However, it said that its capital needs are limited currently and is focusing on conserving cash.

Meanwhile, shares of One97 Communications, the parent company of fintech major Paytm, broke their winning streak of five sessions. The stock fell 3.10% on the BSE to close at INR 634.55 on Thursday. Paytm shares rallied over 10% in the previous five trading sessions. 

Contrasting Views On Delhivery

On the other hand, shares of logistics unicorn Delhivery rose 6.34% on the BSE to close at INR 570. The startup’s shares reached an all-time high of INR 617.70 intraday. 

Shares of Delhivery, which made its stock market debut last week, rose for the third consecutive session on Thursday after brokerage firm Credit Suisse reportedly initiated a ‘buy’ coverage on the stock with a target price of INR 675. 

“The sector is ripe for profitability gains post the recent breakeven for Delhivery. We prefer it to other internet peers on no customer acquisition cost, diversified growth and cheaper valuation for (the) same growth play”, the brokerage was quoted as saying.

In contrast, brokerage IIFL Securities initiated a ‘sell’ rating on the stock citing an ‘unfavourable risk reward’ scenario for the logistics firm.

“While underlying industry structure augurs well for rapid scale up in Delhivery’s revenues, the risk reward is unfavourable, as the valuations seem to price in seamless scale up with less focus on underlying execution risks. We initiate with SELL”, said research analyst Harshvardhan Dole.

Niche logistics sector players have similar asset light models, but compete on differentiated services versus on price alone and, hence, record 10-15% EBITDA margin, Dole said about the industry. 

“With nearly 85% of overall costs being variable, it needs to be seen how Delhivery intends to improve its operating efficiency, gain leverage, pass on the chunk of such gains to consumers, and yet log a meaningful EBITDA margin in the absence of any significant price increase”, he added.

While acknowledging the startup’s focus on growth, the brokerage said that the logistics giant is ‘walking a tightrope, given the execution challenges’. It said that the risk reward is unfavourable and it would await for a better entry point.

Delhivery’s shares have gained nearly 10% in the last three sessions.

Among other new-age tech stocks, ecommerce player Nykaa’s shares rose 1.05% to close at INR 1,470.95, while another fintech major Policybazaar continued its downward spiral, falling 0.74% to INR 653.35. The market capitalisation of PB Fintech, the parent of Policybazaar, declined to INR 29,368.07 Cr.

Meanwhile, the benchmark index BSE Sensex rose over 436 points to close at 55,818.11 points on Thursday.

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