Foodtech giant Zomato‘s shares took a hit of around 5% during intraday trading on Friday (May 31), falling to as low as INR 172.5 from the previous day’s close of INR 180.55. This decline was spurred by Macquarie‘s prediction of a nearly 50% decrease in Zomato’s share price over the next 12 months.
Maintaining its ‘underperform’ rating, the Australian brokerage firm set a price target of INR 96 for Zomato’s stock, representing a 46.7% decrease from the current market price.
The brokerage firm notes increased competitive pressure on Zomato within the quick commerce sector. While acknowledging that Zomato’s quick commerce arm, Blinkit, holds a decent position in the rapidly expanding Indian quick commerce ecosystem, it still anticipates downsides to both consensus forecasts and margins.
Reliance Industries’ Entry into Quick Commerce
It’s worth mentioning that this development follows closely on the heels of reports indicating that Reliance Industries Ltd (RIL), led by Mukesh Ambani, is gearing up to enter the quick commerce segment through its digital commerce platform, JioMart.
Continue Exploring: Reliance Industries set to disrupt quick commerce market with JioMart’s entry, challenging Blinkit, Zepto, and others
The company is expected to commence grocery deliveries in certain cities within a 30-minute timeframe starting next month.
According to Macquarie, this move is likely to benefit RIL while posing a challenge to Blinkit’s operations. NDTV Profit quoted the firm as stating, “The company intends to leverage its in-house last-mile logistics arm, Grab, and is expanding its delivery partner network, as well as considering collaborations with third-party EV bike logistics providers.”
Blinkit’s Performance and Positive Sentiment
Nevertheless, Blinkit has maintained a commanding lead in India’s quick commerce competition for several years. Analysis reveals that Blinkit has consistently been the preferred choice for consumers, outpacing competitors like Zepto, Swiggy Instamart, Dunzo, and Tata-backed BigBasket’s BBNow.
The positive consumer sentiment was evident in Blinkit’s performance for the quarter ending March 31, 2024 (Q4 FY24). With a remarkable 97% year-on-year (YoY) increase in its gross order value during the quarter, Blinkit recorded a revenue of INR 769 crore. For the entire fiscal year, the revenue surpassed INR 2,300 crore.
Continue Exploring: Blinkit’s Q4 FY24 revenue hits INR 769 Crore; loss narrows to INR 37 Crore
Due to the favorable upswing, several other brokerages have expressed optimism about Zomato. Following a robust performance in Q4 FY24, Bernstein increased its price target (PT) for Zomato to INR 230 from INR 200 previously. This upward revision in PT was largely attributed to the strong performance of Blinkit.
However, according to Bloomberg data, Macquarie has maintained the least optimistic outlook on the stock.
The brokerage’s cautious stance comes after reports surfaced of Blinkit facing protests from its delivery executives in Delhi and Mumbai. In certain areas, delivery partners staged strikes over a recent modification in Blinkit’s weekend payout structure for delivery executives around mid-May.
Nonetheless, the company’s shares regained some momentum on the BSE, reaching INR 180.15 by 3:15 PM.
