Shares of Zomato continued to wilt under selling pressure, as they slipped to an over five-month low at Rs 119.35, down 5 per cent on the BSE in Friday’s intra-day trade. The stock of food delivery giant traded lower for the fourth straight day, and had shed 11 per cent during the period.
With the last four day’s decline, the stock price of Zomato has tanked 29 per cent from its 52-week high of Rs 169.10 hit on November 16, 2021. The stock now quotes closer to its record low price of Rs 114 touched on its debut day, July 23, 2021. Zomato had raised Rs 9,375 crore through initial public offer (IPO) by issuing shares at price of Rs 76 per share.
In the past one month, Zomato has underperformed the market by falling 8 per cent, as compared to 5 per cent rally in the S&P BSE Sensex. In the last three months, the stock has declined 13 per cent, as against a 3 per cent decline in the benchmark index.
A sharp decline in stock price has seen Zomato’s market capitalisation (market cap) slip below the Rs 1 trillion mark, to Rs 95,007 crore as of 09:58 am; the BSE data showed. In the process, Zomato had also dropped out from the top-50 most valued listed companies in terms of market cap.
Zomato is the leader in India’s nascent online food delivery business with a massive growth playfield. In July-September quarter (Q2FY22), the company’s adjusted Ebitda loss increased to Rs 310 crore as compared to Rs 170 crore in previous quarter (Q1FY22) and Rs 70 crore in Q2FY21 last year. Adjusted revenue grew 22.6 per cent quarter-on-quarter at Rs 1,420 crore.
JP Morgan in its report dated December 8, 2021 said that its data-driven analysis of 32K restaurants across leading Food Techs across India’s largest food delivery cities suggests Zomato’s network density, exclusivity and unit economics are weaker than Swiggy in the top 3 cities, and overall GMV/economics dependent on tail cities.
Zomato has a thinner Metro restaurant network and density vs. Swiggy. There is higher restaurant exclusivity than expected with Swiggy leading at 56 per cent, and Zomato at 45 per cent, supporting higher take-rates, the foreign brokerage firm said.
It further said, Zomato enjoys a higher proportion of premium restaurants that support higher AOV and turnaround times (TAT).
Zomato has higher discounts, suggesting higher aggression adversely impacting contribution margins (CM). Swiggy casts a wider net with longer service radius expanding customer selection that can help it build/retain leadership, JP Morgan said. The brokerage firm reiterates “underweight” on Zomato given likelihood of disappointment in profitability and unit economics and expensive valuations.