Zomato's Stock Price Surges 8% After A Significant Block Deal

Indian food delivery and restaurant aggregator platform Zomato saw a significant jump in its share price on Tuesday. The company's shares gained 8% during the day's trading, following a large block deal in which 1.5 crore shares, or 0.2 per cent of equity, worth Rs 88.2 crore changed hands at an average price of Rs 59 a share.

The company has received a "buy" rating from major investment bank Citi, with a target price of Rs 76, representing a potential 35 per cent increase from the current levels. According to Citi, the introduction of monetisation by Zomato and Swiggy in the dining-out market proved successful in the medium term.

BSE recorded a trading volume of approximately 66.8 lakh equity shares, valued at Rs 39.36 crore. This figure surpassed the two-week average trading volumes. In contrast, the National Stock Exchange (NSE) recorded a trading volume of 9.78 crore shares, worth Rs 577.03 crore.

Zomato's stock price rose by approximately 8%, reaching Rs 60.40. However, at 10:30 am, the stock relinquished some of its gains and traded at Rs 59. At that time, the company's market capitalisation was slightly below Rs 50,500 crore. The stock had previously closed at Rs 55.96 on Monday.

Zomato's shares have experienced a remarkable 20% increase in the last one month, and they have risen by approximately 50% from their lowest point over the past 52 weeks. Nevertheless, Zomato has declined by 25% in the past year and is currently 21% below its issue price of Rs 76. Moreover, the stock remains more than 60% lower than its all-time high of around Rs 160.

Zomato, which was listed in July 2021, is a prominent food service platform that offers various services such as food delivery and dining-out options. Customers can explore and locate restaurants, place orders for food delivery, reserve a table and pay for dining out at restaurants. The company's initial stake sale garnered approximately Rs 9,375 crore.

Motilal Oswal Financial Services, a domestic brokerage firm, has recently initiated coverage on Zomato with a 'buy' rating and set a target price of Rs 70. The firm anticipates that Zomato will experience robust growth and achieve profitability by FY25, despite facing intense competition.

"In Q3, we saw around 10 per cent decline in the food delivery orders and prior to that quarter also there was modest growth," said Rahul Jain, vice-president, Research, Dolat Capital. "But if you see from a pure commercial perspective, what kind of revenue, cost and profit it can add, with its current contribution being small, any growth on this front wouldn't make any delta, it's just a small incremental effort," he added.

According to Jain, the impact of Covid on consumer behaviour has been observed over the past two to three quarters and has been taken into account while determining the share price.