Shares of Zomato were trading on a volatile note after multiple bunch trades in early trade on Wednesday.
According to reports, Chinese e-commerce giant Alibaba Group is likely to sell around a 3 per cent stake in Indian food delivery firm Zomato for $200 million in a block deal.
Read more: Zomato block deal! Alibaba to sell shares worth $200 mn tomorrow at 5-6% discount, says report
The block deal will take place at a discount of about 5-6 per cent, the report said.
At 11:00 hours, the shares were trading 0.16 per cent higher at Rs 63.65 on BSE. The market cap of the firm rose to Rs 54,431.85 crore.
It’s not the first time when Zomato is in focus, the stock took a beating after the company’s co-founder, Mohit Gupta, resigned earlier this month after about five years at the company.
In August 2022, Uber sold its entire 7.78 per cent stake in Zomato in a bulk deal. As per the BSE filing, Uber sold 61.22 crore shares of Zomato, that it had earned in 2020 by selling Uber Eats in an all-stock deal, at a price of Rs 50.44 per share.
In its recent report, Morgan Stanley has maintained its ‘overweight’ call on Zomato with a target price of Rs 92. It said that exit of Amazon from Food Delivery business in India has no material implication.
Amazon India’s food delivery service, Amazon Food, will shut its operations by the end of the year. Launched nearly two years ago to rival Zomato and Swiggy, the delivery service was only available in Bengaluru and select parts of the country.
“Zomato has been in a downtrend since its inception in the secondary market. Technical data is not sufficient to have a descriptive review. However, looking at the price action, the stock has been hovering in a slender range for the past couple of trading weeks,” Osho Krishan, Sr. Analyst – Technical & Derivative Research, Angel One told Business Today.
“Even on the daily time frame, it is placed well below the 200 SMA, coinciding with the bearish gap of 67 odd levels. As far as levels are concerned, the immediate support is placed around 56-58, breaching which it may plunge lower. While on the higher end, a decisive breach above the 72-75 zone could only attract some traction in the counter in a comparable period,” he added.
Kotak Institutional Equities has maintained its ‘Buy’ rating on the stock with a target price of Rs 100.
Although Swiggy had a lower food delivery share versus Zomato in 1HCY22, its revenues are
higher and indicate a very high take-rate of 29.2% (food + Instamart together).
Zomato’s market share gain, in a tight and duopolistic market, is a positive.
According to media reports, Amazon has shut down its Indian food delivery business, following global cost-cutting measures. Though Amazon did not have a significant market share, this consolidation is positive for incumbents.
“If you look at Paytm or Zomato, the companies have seen the exit of senior executives post them creating large value through the listing and many of them perusing entrepreneurial journey. There could be trading bounces, but investors should still stay away from these new age companies which are trying to juggle between growth and profitability in the near term,” said Divam Sharma, Founder at Green Portfolio.