The share price of Zomato slipped below its issue price of ₹76 to register a lifetime low of ₹75.75 on Tuesday.
Zomato opened at ₹83.70, against the previous close of ₹82.40, on the BSE and slipped to the new low during morning trade even as the broader market recovered from Monday’s losses. Benchmark indices had slipped 3 per cent on Monday owing to growing geopolitical tensions between Russia and Ukraine and inflation concerns.
However, the Zomato scrip immediately recovered to rule above the IPO and gained further as the overall market witnessed a strong rally. Zomato closed ₹82.75, up ₹0.35 or 0.42 per cent over the previous day’s close, on the BSE. It recorded an intraday high of ₹84.65,
Its m-cap stood at ₹65,140.24 crore on the BSE at closing.
It closed at ₹82.50 on the NSE, up ₹0.05 or 0.06 per cent.
Trading volume also jumped about 2.5 times at 46.91 lakh shares, against the two-week average of 19.11 lakh shares. However, among them, deliverable quantity stood at 19.21 per cent, signalling that the bulk of the trading was intra-day. On the NSE, 10.62 crore shares changed hands and 31.16 per cent of them were presented for delivery.
Q3: Thumbs down from brokers
The stock, which doubled on listing and surged further last year, has been under pressure in the last three months. Besides adverse global market sentiment, weaker-than-expected financial performance too impacted the stock.
Zomato had posted a consolidated net loss of ₹63 crore for the quarter ending December 31, 2021, as against the net loss of ₹352.6 crore in the year-ago period and ₹429 crore in the previous September quarter. Its revenue from operations stood at ₹1,112 crore, up 82.47 per cent, against ₹609.4 crore in the year-ago quarter.
Brokerages have a mixed stance on the scrip, with concerns over profitability and aggressive capital allocation in unproven areas.
Jeffries reduced its target price to ₹120 from ₹175 while maintaining a ‘buy’ rating on the stock, following a weak Q3 and a pullback in global comps in expectation of a pick-up.
“After a strong 2Q, an underwhelming GOV (+1.7 per cent, q-o-q) in 3Q will raise questions on India opportunity. Earnings release remains opaque, lacks substance, and describes only selective aspects of the business,” it said in a note.
“Lack of management call leaves a lot to the imagination and our inexperience with the Internet sector does not help either,” it said.
Edelweiss maintained its ‘hold’ rating with a revised target price of ₹101, down from ₹151 earlier, stating that Zomato’s Q3FY22 results disappointed on growth and profitability with a meagre 1.7 per cent quarter-on-quarter growth in gross order value (GOV) , 5 per cent order growth and 10 bps dip in contribution margin.
“The management attributed lower GOV to a drop in delivery charges and dining out regaining as the economy reopens. The management sees a big opportunity in quick commerce as well as extending credit to constituents of the ecosystem,” it said.
“We are cutting our FY23/24 EBITDA estimates by about 35 per cent to factor in lower growth and profitability. While we would have liked to upgrade the stock considering correction, faltering growth and profitability, and aggressive capital allocation in unproven areas, keeps up on the side-lines,” it added. `