Zomato’s losing steam and the Blinkit drag

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Subscribe to enjoy similar stories. Zomato has been a poster child of startup success. After its IPO in 2021, the stock had been a dull counter until June 2023—the first quarter when its bottom line turned positive.

There has been no looking back since. On the back of 44% annualized revenue growth and sustained profitability growth, the stock quadrupled investor wealth in the year and a half until December. But the rally seems to be losing steam now—the counter has corrected by almost 17% off its peak.

While some consolidation after a steep rally is par for the course, the latest bout of correction has been particularly steep—the Zomato stock has eroded about 12% of investor wealth in less than a week. Panic around the stock increased after brokerage Jeffrey’s recently downgraded its recommendation on Zomato to a ‘hold’ rating from a ‘buy’, and cut its share price target significantly from ₹335 apiece to ₹275—which is only a 10% upside over the current market price of about ₹250. On Wednesday (8 January) afternoon, Zomato shares were down by about 2.8% at ₹245.35 apiece on BSE, while the benchmark Sensex index was down 0.56%.

Also read | Zomato upends tradition with Sensex entry Zomato had started as an online restaurant aggregator platform in 2015. Since then, it has diversified into quick-commerce, via its acquisition of Blinkit, and entertainment-ticketing (District) via its recent acquisition of this business from Paytm. It has also backward-integrated into providing food supplies to restaurants through HyperPure.