India's Zomato hits record high, bucking internet stocks' sluggishness

PB Fintech

01/03/2024 08:51

By Nandan Mandayam and Navamya Ganesh Acharya
       BENGALURU, March 1 (Reuters) - Shares of Indian food
delivery platform Zomato  ZOMT.NS  hit a record high on Friday,
as improving profitability paves the way for future growth,
triggering a turnaround in investor sentiment.
    Zomato is the most-valuable internet stock in Asia's
third-largest economy, with a market capitalisation of more than
1.51 trillion rupees ($18 billion). On Friday, its shares rose
nearly 5% to 173.5 rupees.
    India's several new-age internet companies that hit the
markets during the IPO frenzy in 2021 jumped after listing but
slumped eventually on investor scepticism over lofty valuations
and business models. Several of these firms also fell below
their issue prices.
    Zomato, which was the first to list among peers like
Policybazaar  PBFI.NS , Paytm  PAYT.NS , and Nykaa  FSNE.NS ,
had a limited track record of profitability, and investors
fretted over its strategic moves. 
    Now, with the company's results trumping expectations for
several quarters, sentiment has "completely reversed," Sachin
Dixit, internet research analyst at JM Financial, said.
    "Investors are incrementally appreciative of whatever Zomato
is trying to do and there is a certain amount of consumer love
for the business model too."
    Zomato's "consistent earnings improvement" and timely
delivery on growth targets sets it apart from its peers who have
"no clear path to growing profitability", Elara analyst Karan
Taurani said.
    Nykaa, which was an investor darling, is facing certain
macro headwinds for the moment, Dixit noted. 
    Meanwhile, Paytm, under the regulator's scrutiny, has
tanked. 
    Zomato, with over half the market share in food delivery,
will continue to dominate the IPO-bound Swiggy, analysts said. 
    Blinkit - Zomato's quick commerce business, which it
acquired in 2022 - is expected to turn EBITDA-positive next
fiscal year and is viewed by investors as the next lever of
growth for the firm.

($1 = 82.8580 Indian rupees)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
India's Zomato's volatile journey since market debut    https://reut.rs/3wDJCOQ
Analysts expect India internet stocks to rise in the next 12
months    https://reut.rs/3wi4ZF2
Zomato and its peers since late 2021    https://tmsnrt.rs/49yOxiC
How analysts rate Zomato and its peers    https://tmsnrt.rs/42YAnEN
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Nandan Mandayam and Navamya Ganesh Acharya in
Bengaluru; Editing by Mrigank Dhaniwala)
 ((Nandan.Mandayam@thomsonreuters.com; Mobile: +91 9591011727;))