Zomato share price rises despite dip in broad market indices

Zomato's share price rose by 2.98% on Wednesday, a day after the company announced its second-quarter results as the markets were encouraged by the stability in the food delivery business and hyper-growth prospects of quick commerce.

The Zomato scrip ended at Rs 264 on Wednesday as compared to the previous close of Rs 256.35, registering a gain of Rs 7.65, despite the broader indices of BSE Sensex and Nifty 50 ending lower.

Zomato registered a 389% year-on-year (YoY) increase in net profit for the second quarter of FY25 to reach Rs 176 crore. The revenues rose 68.50% YoY to touch Rs 4,799 crore.

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Today, Zomato has a diversified business, including food delivery, quick commerce, events (going out business), and B2B supplies. The quick commerce business of Zomato-Blinkit has been the standout for the company.

Brokerage house Motilal Oswal, in its note following the second quarter results of Zomato said, “Zomato’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and ecommerce.”

The gross order value (GoV) of Blinkit for the second quarter registered a 122% YoY growth. On the other hand, the food delivery business saw a GoV rise of 21.4% which marginally missed the estimates of the market.

Kotak Institutional Equities in its note said, “We retain BUY rating on Zomato as the food delivery business remains on a strong footing with market-share gain and improving cash generation. Blinkit is the largest QC player of its kind with the best economics.”

This performance of Zomato is also reflected in its rising market capitalisation which stood at $27.40 billion on October 23. A year ago it was $11.73 billion.

The Board of Zomato also approved its capital raise plans for up to Rs 8,500 crore through qualified institutional placements. It ended the quarter with Rs 10,813 crore in cash balance, while recording one major expense of Rs 2,104 crore for its acquisition of Paytm’s event ticketing business, Insider.

“While the business is now generating cash (vis-a-vis a loss-making business at the time of IPO), we believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today,” noted Co-Founder and CEO Deepinder Goyal in a shareholder letter.

The growth plans outlined by Zomato have had brokerage houses giving a buy rating for the stock with a target price of Rs 310.