Zomato shares rise 5% amid heavy trading volumes; Softbank likely seller; HSBC lifts the target price

Shares of Zomato rose sharply during the early trading session on Wednesday amid block deal buzz and positive views from the global brokerage firms. The stock has been on the radar of investors since the expiry of its lock-in of shares of the Blinkit investors.

SoftBank Group’s affiliate SVF Growth Singapore is likely to sell 1.17 per cent stake in the company for at least Rs 940 crore. SVF Growth Singapore will sell 10 crore shares at a floor price of Rs 94 apiece. According to the heavy volumes on exchange, the deal has been partially executed. However, Business Today could not independently verify the same.

According to the data from National Stock Exchange (NSE), about 6.4 crore equity shares amounting to Rs 629.82 crore exchanged hands as of 9.35 am on Wednesday. Similarly, 34.65 lakh equity shares worth Rs 34.05 crore were traded on BSE as of the same time.

Shares of Zomato surged more than 5 per cent on Wednesday to Rs 99.50, before giving up gains partially, commanding a total market capitalization of close to Rs 85,200 crore. The scrip had settled at Rs 94.65 on Tuesday. The stock has surged about 125 per cent from its 52-week low at Rs 44.35 hit in January this year.

Overseas investment banker HSBC has increased its target price on Zomato to Rs 120 from Rs 102 earlier and maintained the 'buy' rating. "A deep dive into hyperlocal further raises our conviction on the long-term value of Blinkit," said HSBC which values Blinkit now at $5 billion.

Global brokerage firm Morgan Stanley has maintained an 'overweight' rating on Zomato with a target of Rs 115 per share. The overseas investment banker said that if the company sticks through its platform fee it could drive improvement in profitability.

Prior to this, Tiger Global's Internet Fund III Pte sold its entire 1.4 per cent stake in food delivery platform Zomato through open market transactions. It had received that stake as a result of the Blinkit merger for $136 million, which was sold on Monday, as soon as lock-in expired. The New York-based firm sold 12.35 crore shares at Rs 91.01 apiece to raise about Rs 1,124 crore.

SoftBank owns 3.35 per cent stake in Zomato, which was issued during the Blinkit deal for selling its holding to the company, and the lock-in period for that stake ended on August 25.

On the other hand, Zomato has been increasing its focus on profitability and has decided to implement a platform fee of Rs 2-3 in select cities. This platform fee will be applied regardless of the total value of items in the shopping cart. Even the Zomato Gold subscribers will not be exempted from this fee.

Zomato had turned profitable for the first-time ever in the June 2023 quarter. The food aggregator platform company had reported a consolidated profit after tax of Rs 2 crore compared to a loss of Rs 186 crore in the year-ago period. Revenue from operations grew 71 per cent year-on-year to Rs 2,416 crore in Q1FY24, up from Rs 1,414 crore in the corresponding period a year ago.

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