Zomato Shares Tank Nearly 5% After Macquarie Forecasts 47% Downside

Shares of foodtech major Zomato tanked about 5% during intraday trading on Friday (May 31), going as low as INR 172.5 from the previous day’s close of INR 180.55. This follows after Macquarie predicted neraly 50% decline in Zomato’s share price over the next 12 months. 

While reiterating its ‘underperform’ rating, the Australian brokerage firm assigned Zomato’s stock a price target of INR 96, which is 46.7% lower than the stock’s current market price.

The brokerage sees increased competitive pressure on Zomato in the quick commerce sector. While it pointed out that the foodtech major’s quick commerce arm Blinkit holds a decent position in the rapidly expanding Indian quick commerce ecosystem, it still sees a downside to both consensus forecast and margins.

It is pertinent to note that the development comes a couple of days after it was reported that Mukesh Ambani-led Reliance Industries Ltd (RIL) is planning a foray into the quick commerce segment with its digital commerce arm JioMart. 

The company is likely to begin delivering groceries in select cities in under 30 minutes from next month. 

Macqurie sees the move to play in favour of RIL and dent Blinkit’s business. “The company will use its own last-mile logistics arm, Grab, and is ramping up its delivery partner fleet as well as exploring partnerships with third-party EV bike logistics players,” NDTV Profit quoted it as saying. 

However, Blinkit has been dominating the quick commerce race in India over the past few years. According to a consumer sentiment analysis by Inc42 and Clootrack, Blinkit emerged to be the top preference for consumers, beating Zepto, Swiggy Instamart, Dunzo, and Tata backed BigBasket’s BBNow.

The healthy consumer sentiment was also reflected in its business for the quarter ending on March 31, 2024 (Q4 FY24). With a 97% year-on-year (YoY) spike in its gross order value in the quarter, Blinkit’s revenue for the quarter stood at INR 769 Cr. For the full fiscal, the figure exceeded INR 2,300 Cr. 

On account of the healthy uptick, other brokerages have been bullish on Zomato. After a strong Q4 FY24 show, Bernstein raised its price target (PT) for Zomato to INR 230 from INR 200 earlier. The increase in PT was primarily owed to Blinkit’s performance. 

However, Macqurie has maintained the most bearish outlook towards the stock, according to Bloomberg data. 

The brokerage’s bearish outlook comes days after it was reported that Blinkit is dealing with a protest from its delivery executives in Delhi and Mumbai. Delivery partners in select neighbourhoods held strikes over a recent change in Blinkit’s weekend’s payout structure for the delivery executives around the middle of May. 

However, the company’s shares gained some momentum back on the BSE, touching INR 180.15 by 3:15 PM.