NEW DELHI: The shares of foodtech platform Zomato fell 6.40% on Monday following its announcement to acquire quick commerce delivery firm Blinkit Rs 4,447.48 crore in a share swap deal. The stock began the day’s trading at nearly 4% higher at Rs 73 apiece on the BSE.
However, as the session progressed, it erased all its gains and closed the day 6.40% lower at Rs 65.85. Since Zomato on Friday post-market hour said its Board has approved the deal to take over Blinkit (formerly known as Grofers), there is a wide concern among shareholders that profitability will be delayed as Blinkit, like Zomato, is a loss-making entity which runs on funds raised by VCs.
Analysts at JM Financial noted that given the intense competitive intensity in the quick commerce space, the path to profitability for Zomato group (post-acquisition) can get extended by at least a year (from FY25 to FY26). VK Vijayakumar, chief investment strategist at Geojit Financial Services, also said this is a segment where profitability is a few years away. “Some of them might do well in the long run. But retail investors, instead of chasing hope, will be better off chasing solid stocks with strong fundamentals now,” he added.
For the quarter ending March (Q4FY22), Zomato had reported a net loss of Rs 359 crore, up from Rs 134.2 crore in the same quarter last year due to rise in expenses. The stock has been one of the biggest wealth destroyers of this year, falling over 53%. Currently, Zomato stock is trading about Rs 10 lower than its IPO prices of Rs 76 and from its peak market capitalization of Rs 1.33 lakh crore, its current m-cap has come down to about Rs 50,000 crore. Shivam Bajaj, founder & CEO at Avener Capital, said this high cash burning sector houses fierce competition from the likes of Zepto, Dunzo, Swiggy Instamart and BigBasket.
Blinkit’s profitability issue
There is a wide concern among shareholders that profitability will be delayed as Blinkit is a
loss-making entity.