Shares of food aggregator Zomato slipped 1.4 per cent to hit an all-time low of Rs 75.55 on BSE. The stock has been falling for the last four trading sessions.
Currently, the stock is down over 55 per cent below its all-time high. It touched an all-time high of Rs 169.10 on November 16, 2021.
Zomato on Tuesday said that its board of directors has approved grant of loan of up to $150 million to Grofers India Private Limited (GIPL) in one or more tranches.
In an exchange filing, Zomato said its board has delegated the authority to the senior management of the company to decide the key terms of the loan and execute the definitive documents at a future date.
“The interest rate for the loan will be 12 per cent p.a. or higher with a tenor of not more than 1 year. This loan will support the capital requirements of GIPL in the near term and is in line with our stated intent of investing up to $400 million cash in quick commerce in India over the next 2 years,” it said.
“Zomato is currently trading at a valuation of below $8 billion. For retail investors, we would suggest avoiding the stock for now and waiting for the growth to come and the synergies from investments and Blinkit acquisition to come,” Divam Sharma, Founder, Green Portfolio told Business Today.
“We would also want to see the growth in the core business which is food delivery as other synergies will take time to reflect,” he added.
“Post its listing, the company has committed $275 million in four start-ups and has also committed to deploying over $1 billion over the next 2 years. The business is continuing to get highly intense competition, and innovations in the space are getting PE money.” Sharma stated.
Manoj Dalmia-Founder and Director Proficient Equities Limited said, “The stock looks weak despite the news and is currently at its listing price. It can touch Rs 69.05 levels if it closes below Rs 76.15.”
“The technical setup is bullish for the stock on a rebound from its support of 75 levels and suggesting a 5% more rise from the current levels,” said Dr. Ravi Singh-Vice President and Head of Research-ShareIndia.
“It will ultimately be about who is able to create a larger war chest and be able to penetrate more in the quick commerce space as we see Reliance, Tata and Swiggy which is backed by Naspers competing along with Zomato,” he said.
Brokerage house Dolat Capital noted that the declining contribution with weak growth in Gross Order Value (GOV), suggests that the growth is getting softer while cost pressures are not moderating. This, along with a further allocation of Rs 550 crore on minority investments, is straining cash-flows. It has a ‘Sell’ rating on the stock with a target price of Rs 75 per share.
Also, SoftBank-backed quick commerce start-up Blinkit, earlier known as Grofers, has signed a merger deal with food delivery unicorn Zomato, sources privy to the development told Business Today.
In August 2021, Zomato had received CCI approval for a $100-million investment for 9.3 per cent stake in Blinkit.
The company also said that it would acquire a 16.66 per cent stake in Mukunda Foods Private Ltd, a food robotics company, for a cash consideration of $5 million.
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. It slipped below its issue price today. The market cap of the firm slipped below Rs 61,ooo crore mark.
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Reference Link: https://www.businesstoday.in/markets/stocks/story/zomato-shares-hit-all-time-low-is-there-more-pain-ahead-326200-2022-03-16