Zomato Shares jumped 7% in early trade on Monday following its inclusion in the Sensex and shareholder approval for a Rs 8,500 crore fundraising via a Qualified Institutional Placement (QIP).
The stock touched an intraday high of Rs 284.30 on the BSE, up from its previous close of Rs 264.15. The stock, however, gave up nearly half of its gain to close the day with a rise of 3.58% to Rs 273.6.
Zomato shares, already up 125% this year, are now trading close to their 52-week high of ₹298.20 reached in September.
Monday’s rally in Zomato’s stock price pushed the company’s market capitalization to ₹2.38 lakh crore.
The rally comes on the back of the news that the food delivery company is set to replace JSW Steel on the Sensex starting December 23 in a reshuffle that typically attracts fresh inflows from institutional investors tracking the benchmark index.
Meanwhile, Zomato’s shareholders had approved the QIP to strengthen the company’s balance sheet. To be sure, the company’s cash reserves declined by Rs 1,726 crore in the September quarter, primarily due to its Rs 2,014 crore acquisition of Paytm’s entertainment ticketing business.
Global brokerage Morgan Stanley maintained its “overweight” rating on Zomato and raised its target price to Rs 355 from Rs 288. The firm cited the company’s dominance in India’s food delivery and quick-commerce market, where it holds a 40% share, and predicted Zomato will achieve adjusted EBITDA breakeven in the next two to four quarters.
“Margins are expected to improve to 2.2% by FY27 and 5.1% by FY31, supporting an annual profit pool of nearly $1 billion by 2030,” Morgan Stanley was quoted as saying by Business Today.
The brokerage also pointed the market may have undervalued Blinkit, Zomato’s quick-commerce arm, assigning it an implied valuation of Rs 120 per share compared to Morgan Stanley’s Rs 212 per share estimate.
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