Shares of multibagger Zomato Ltd climbed 3 per cent in Wednesday's trade, taking its year-to-date (YTD) rise to 130 per cent. Zomato recently announced raising Rs 8,500 crore via qualified institutional placement (QIP) at a floor price of Rs 265.91; and on Wednesday, the scrip climbed 2.87 per cent to hit a high of Rs 288.20, inching closer to its September high of Rs 298.20.
Kotak Institutional Equities has come out with a note, offering key takeaways from the Zomato's QIP placement document. The first is that Zomato intends to invest Rs 2,100 crore from the proceeds toward QC capex over FY2026-28. With average area of 3,118 square feet per dark store, Blinkit operated 2.5 million square feet of dark store area as of September 30 and generated Rs 89,500 per square feet of net gross merchandise value (GMV), high in the context of a fairly young store network. Third, Zomato intends to incur capex to open a new dark store with additional capex required toward warehousing.
The brokerage has retained its 'Buy' rating and suggested a fair value of Rs 315 for Zomato. The stock, which will soon be included in the Sensex club, climbed 2.87 per cent to hit a high of Rs 288.20. Kotak's target price suggests a 9 per cent potential upside on the counter over the prevailing Zomato price.
Blinkit had a network of 791 dark stores across 48 cities. Zomato has indicated Rs 57 lakh of capex per dark store. In addition, it has cumulatively spent Rs 250 crore of warehousing capex over FY22-1HFY25.
"We reckon a new player would thus need to incur Rs 700 crore on capex alone to build a physical network similar to that of Zomato. Investments toward customer acquisition, branding, technology and cloud will be over and above," Kotak Institutional Equities said.
The domestic brokerage said Blinkit had 791 stores as of September 30, 2024, of which 380 stores were added in the past four quarters, suggesting a young store network.
In 2QFY25, with average store area of 3,118 square feet, Blinkit generated an estimated net throughput of Rs 89,500 per square feet against Rs 35,500 per square feet generated by Avenue Supermarts (DMart).
Kotak said the food delivery business had 34 lakh power customers (annual ordering frequency of 50 or more) in FY2024. This count witnessed YoY growth of 24 per cent. Annual unique transacting customer base was 6.3 crore in FY2024, a YoY growth of 8.6 per cent with implied annual average ordering frequency of 12 per customer.
"As per Zomato, only 10 per cent of internet users order food online versus 50-55 per cent in the US and China. Among other updates, Zomato will shift the restaurant/events booking business completely to District with the core Zomato app focusing largely on food delivery," it said.