Zomato shares rise 7%: Two factors behind the rally today

Shares of Zomato rose 7% in early deals today after its inclusion in the 30-stock Sensex and an approval for the company's Rs 8,500 crore Qualified Institutional Placement (QIP). Zomato shares opened higher at Rs 273 against the previous close of Rs 264.15. The stock surged 7% intra day to Rs 282.85. A total of 14.70 lakh shares of Zomato changed hands amounting to a turnover of Rs 41.79 crore on BSE. The market cap of the firm rose to Rs 2.47 lakh crore on Monday. 

The stock of the online food delivery firm is bullish in the short as well as long term as the scrip is trading higher than the 5 day, 10 day, 20 day, 50 day, 100 day and 200 day moving averages. 

The multibagger stock is trading near its 52 week high of Rs 298.20 reached on September 24, 2024. It has gained 338% in two years and risen 147.30% in a year.

It has seen very less volatility in the last one year with a beta of 0.7. 

After the recent rejig of Sensex, Zomato is set to replace JSW Steel in the 30-stock index from December 23. The inclusion comes at a time when Zomato stock has already risen 125 percent this year. 

On the other hand, the company's shareholders have cleared a proposal for raising Rs 8,500 crore through the QIP mode, the company said. 

In October, Zomato's board approved this fund raise to bolsidter its balance sheet. The company had said its cash reserves fell by Rs 1,726 crore during the September quarter, primarily due to the Rs 2,014 crore acquisition of Paytm’s entertainment ticketing business.

Meanwhile, Morgan Stanley has retained its 'overweight' rating on Zomato with a revised target price of Rs 355 from an earlier value of Rs 288 per share.

The global brokerage said it expects the online food-and quick-commerce aggregator to maintain its near 40 per cent market share in spite of a rise in competition.

"Rising share of quick commerce in India's retail market, strong execution in food delivery/quick commerce, deep balance sheet and large profit pool by 2030 keep us 'Overweight'. We build in adjusted EBITDA breakeven for the next two to four quarters, implying substantial investments in aggressive expansion. We assume margins of 2.2 per cent by F2027 and 5.1 per cent by F2031, implying an annual profit pool of close to $1 billion for this business. We believe the market has assigned a value of Rs 120 per share to Blinkit (vs our PT implied value of Rs 212/share). We see downside support at Rs 160 (-35 per cent from CMP) with potential upside of 37 per cent to our price target," said Morgan Stanley.