The stock market journey of foodtech giant Zomato took a downturn on Friday (May 31) as its shares plummeted nearly 5% during intraday trading, reaching as low as INR 172.5 from the previous day’s close of INR 180.55. This significant drop came in the wake of a stark prediction by Macquarie, foreseeing a substantial 47% decline in Zomato’s share price over the next 12 months.
Macquarie’s Forecast and Competitive Landscape Analysis
Maintaining its ‘underperform’ rating, the Australian brokerage firm assigned Zomato’s stock a price target of INR 96, indicating a substantial 46.7% dip from the stock’s current market value. Macquarie highlighted increased competitive pressures on Zomato within the quick commerce sector. Despite acknowledging Zomato’s notable position in this rapidly expanding ecosystem through its quick commerce arm, Blinkit, Macquarie expressed concerns regarding both consensus forecasts and profit margins.
Reliance Industries’ Foray and Potential Impact
The forecast comes in the wake of reports indicating Mukesh Ambani-led Reliance Industries Ltd (RIL) is gearing up for a swift commerce segment entry through its digital commerce arm, JioMart. With plans to commence grocery deliveries in select cities within 30 minutes from next month, RIL’s entry is anticipated to intensify competition and potentially dent Blinkit’s business.
Blinkit’s Dominance and Consumer Sentiment
Despite these challenges, Blinkit has been a frontrunner in India’s quick commerce race, as affirmed by a consumer sentiment analysis by Inc42 and Clootrack. Blinkit emerged as the top consumer preference, surpassing competitors like Zepto, Swiggy Instamart, Dunzo, and Tata-backed BigBasket’s BBNow. This dominance was reflected in Blinkit’s robust financial performance for Q4 FY24, boasting a staggering 97% year-on-year spike in gross order value and a quarterly revenue of INR 769 Cr, exceeding INR 2,300 Cr for the full fiscal year.
Brokerage Perspectives and Market Dynamics
While some brokerages have remained bullish on Zomato, citing Blinkit’s stellar performance, Macquarie’s bearish outlook stands out, reflecting broader market concerns. Despite recent setbacks such as protests from delivery executives in Delhi and Mumbai over payout structure changes, Zomato’s shares showed signs of recovery on the BSE, touching INR 180.15 by 3:15 PM.
Amidst evolving market dynamics and intensifying competition, Zomato faces both opportunities and challenges. While its quick commerce arm, Blinkit, has demonstrated resilience and consumer appeal, concerns over competitive pressures and profit margins persist. As the company navigates these complexities, investor sentiment remains pivotal in shaping its trajectory in the burgeoning foodtech landscape.
