Zomato, the food-tech behemoth that shook up India’s stock market with its IPO, has of late been down seriously. On March 11, its share price took a hit of more than 3.7%, marking the fifth consecutive session of decline. The stock has declined more than 11.23% over this time, and investors and market observers are worried. While Zomato is experiencing this decline with low market sentiments, some are wondering whether the recent dip is a possible bargain-hunting opportunity for those who want to invest in the stock.
In this blog, we shall discuss the rationale for Zomato’s steep price fall, what the recent actions of the company mean, and whether it is the right time for investors to think about buying the stock for long-term appreciation. We shall also evaluate the company’s latest performance, its move towards quick commerce with Blinkit, and the general market scenario influencing its share price.
Zomato’s Recent Stock Performance
The stock price of Zomato has been declining over the last five straight trading days. On March 11, the share price dipped by another 3.70%, closing at ₹203 per share on the National Stock Exchange (NSE). The stock also touched an intraday low of ₹200 per share at one time, adding to its recent downfall. The decline is a sizeable one of 11.23% in the last five trading days alone.
Though the overall market sentiment has been weak, Zomato’s stock has been hit especially hard, with a significant drop in share price even as other stocks have remained resilient. On the same day, the Indian stock market as a whole also opened in the red, with the BSE Sensex falling to a low of 73,668 points before recovering partially. The NSE Nifty 50 was at 22,426.65, with a slight increase of 0.15%.
This prolonged downturn has left investors wondering: is Zomato a troubled stock, or is it simply a short-term blip? Do investors take this as an opportunity to buy the dip or wait and see what happens before making a move?
The Strategic Shift: Zomato’s New Name and Focus on Quick Commerce
On the same day that the sharp drop occurred, Zomato also announced a turning point that may change its direction in the market: shareholders of the company passed a special resolution to rename the company “Eternal Ltd.” The company explained that the name change would only be for the corporate entity and would not extend to the brand or the Zomato app.
This action marks a big change in the strategic direction of Zomato. The company has been changing and growing its business model, from being primarily focused on food delivery to venturing into newer segments like quick commerce. The rebranding marks a wider aspiration and indicates future growth strategies.
In addition to the name change, the shareholders also sanctioned the modification of the company’s Memorandum of Association (MoA) and Articles of Association (AoA). These modifications are regarded as a step towards consolidating the company’s position and codifying its growth plans. The sanction was carried out through a postal ballot, with the findings stated in the scrutinizer’s report published on March 9.
Although the strategic shifts are significant for Zomato’s future, they won’t be likely to bring relief to the stock in the short term. Investors will be worried about the firm’s recent financial performance, which has been hit by increasing costs related to the scaling up of its quick commerce platform, Blinkit.
Zomato’s Q3 FY25 Results: Shrinking Profits Despite Revenue Growth
The recent performance of the company in Q3 FY25 has further fueled worries about its stock. Zomato saw a whopping 57% fall in its consolidated net profit, which dropped to ₹59 crore in the third quarter of FY25 from ₹138 crore in the corresponding quarter last year. The fall in profit is due to the higher costs incurred while expanding its quick commerce platform, Blinkit.
Although the dip in profit is alarming, revenue growth for Zomato has been robust. The revenue of the company during the October-December quarter rose 64.9% year-on-year to ₹5,405 crore, from ₹3,288 crore in Q3 FY24. On a quarter-on-quarter basis, the company’s revenue rose 12.6% from ₹4,799 crore in Q2 FY25.
Despite the revenue increase, the fall in profit indicates the difficulty Zomato is experiencing in matching its expansion expenses with its top-line generation. The expansion for Blinkit, Zomato’s quick commerce business, has resulted in heavy initial investments, which might not reflect immediately as profitability.
The Impact of Market Sentiment and Stock Performance
The negative market sentiment has certainly been a key contributor to the recent performance of Zomato’s stock. Apart from its issues, the overall market has experienced various headwinds, which have prevented growth stocks such as Zomato from sustaining positive momentum. The Indian stock market, especially, has been moving with heightened volatility, and hence, it has become more challenging for technology-based stocks to show positive performance.
Zomato’s stock has also witnessed considerable profit booking by investors. The stock declined by approximately 12% over the past month, even though its value had surged previously. Investors who had witnessed the stock go up in earlier months would have probably booked the profit on it, resulting in a short-term sell-off. The current price movement can be viewed as being part of this natural process of profit-taking.
As significant as the growth challenges faced by Zomato are, there is an undeniable underlying business at the company. The trend toward quick commerce and the acquisition of Blinkit might offer great avenues for future growth. Still, the future won’t be free of challenges, and the company’s fortunes must be carefully tracked by investors.
Is This a Bargain Hunting Opportunity
For investors who want to ride the recent price fall, the question in mind is: is it the right time to purchase Zomato stock? A 5% drop within a single trading day may signal short-term volatility, but it may also be a low point to catch a bargain, especially if you are convinced of the long-term growth prospects of the company.
Zomato’s entry into quick commerce, its strategic investments, and its robust revenue growth despite profitability issues could set the company up for robust performance in the next few years. The company has already gained a leadership position in India’s food delivery market, and its entry into newer segments such as grocery and other on-demand services could offer further revenue streams.
For longer-term investors, this downtrend could be an investment opportunity if the stock price just continues to plunge further. Short-term gain-hunters must carefully analyze, however, the near-term struggles of the company and if and how much immediate market catalyst will the company enjoy in driving its stock price.
The Future of Zomato: Will It Rebound?
Zomato’s future will be based on various aspects. For starters, the company needs to navigate its expansion expenses, specifically the investments made into Blinkit, and endeavour to become profitable in this area. The performance of Blinkit in gaining market share in the highly competitive quick commerce sector will be instrumental to Zomato’s overall growth strategy.
Second, the ability of the company to continue expanding its food delivery business in the face of growing competition will also be important. Zomato has major competition from Swiggy and other local competitors in the market, and holding on to its market share will be important to ensure growth continues.
Finally, general market conditions will also affect Zomato’s performance. The volatility in the stock market, particularly in tech and growth stocks, might influence investor sentiment and share prices in the short run.
All in all, even though the decline in the stock price of Zomato is disappointing to some investors currently, the company’s long-term prospects are not compromised at all. As the firm continues to broaden its top lines and push towards new business lines such as quick commerce, it can hope to bounce back from its current failure and become prosperous in the days to come. But short-term investors will need to keep a watchful eye, since profitability for the firm is still an issue.
Zomato’s stock is both a challenge and an opportunity for investors. Whether it is a time to hunt for bargains or wait for greater clarity is a function of your risk appetite and investment horizon. But one thing is sure: the food tech behemoth is at a critical juncture, and its next steps will determine its future in the Indian market.
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