Zomato stock was on a roll after the company announced earnings for the first quarter of this financial year. The food delivery platform reported a profit after tax at Rs 2 crore in the June 2023 quarter. It had reported a net loss of Rs 189 crore and 186 crore in the March 2023 quarter and June 2022 quarter, respectively.
The stock hit a 52-week high of Rs 102.85 on August 7, 2023, and a 52-week low of Rs 44.35 on January 25, 2023. It has recovered over 106 per cent from its recent lows.
According to JM Financial, Zomato's stock is likely to be volatile in the near term on account of market speculation around possible exits by some pre-IPO shareholders (VC/PE/Chinese investors) of the company as well as erstwhile shareholders of Blinkit who had received it under a share swap deal.
"While we cannot accurately predict when (if at all) these shareholders would want to exit, we note that several of them are already sitting on sizeable gains, albeit a large chunk of it is unrealised. A few cues from past actions of these investors suggest that at least some of them would be eager to book profits post the recent run-up in the stock," it said.
It further added that a sizeable proportion of Zomato’s shares could be available for trade in the near term. The total value of the Zomato stock that all these investors hold is Rs 18,000 crore. Even if one were to assume that only 50 per cent of the VC/PE/Chinese investor stake would be available for trade, the total short-term outflows could be close to Zomato's total IPO size of Rs 9375 crore.
"We strongly suggest that long-term investors use these liquidity events to build a sizable position in Zomato as it not only offers a strong play on India's online food services market but is also, post the Blinkit acquisition, shaping up into a formidable diversified play on online retail," said JM Financial.
Zomato's Debut
Zomato made a bumper debut on bourses with the unicorn hitting the Rs 1-lakh crore market capitalisation mark. The stock opened at Rs 116, 52.63 per cent higher on NSE against the issue price of Rs 76.
Disclaimer: The stocks mentioned in the story are for information purposes only. Investors or market participants should consult their financial advisors before taking any position.
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