zomato: Zomato shares hit a 52-week high on narrowing losses

The share price of food and grocery delivery platform Zomato closed on Friday at Rs 77.57 on the BSE Sensex, after hitting a 52-week high of Rs 77.95 during the day. With this, Zomato’s share price has also closed above its issue price of Rs 76 at the time of its initial public offering (IPO).

The Gurugram-based company’s shares were offered at around Rs 72-76 during its IPO in 2021. It had subsequently listed at a significant premium of Rs 125 per share. The 30-stock benchmark index is also near its all-time high of 63,583.07. On Friday, the Sensex ended at 62,625.63.

On May 19, Zomato reported that its earnings before interest, taxes, depreciation, and amortisation (ebitda) had turned positive at Rs 28 crore, excluding the quick commerce business, for the quarter ended March 31. The company had also said it aimed to achieve net profit on a consolidated basis in the next four quarters.

During the quarter, the company narrowed its losses to Rs 188 crore from Rs 360 crore a year ago, and Rs 345 crore a quarter ago. At Rs 2,056 crore, the consolidated revenue recorded a year-on-year (y-o-y) increase of 70%.

Following the March-quarter results last month, several brokerages had taken a bullish view of Zomato. Last July, the company’s share price had scraped a 52-week low of Rs 40.55 on the BSE.

Jefferies had said that Zomato’s unit economics would “steadily improve” as scaling up unlocked cost efficiencies, in addition to customer willingness to pay higher convenience fees.

Meanwhile, BofA Securities upgraded its outlook on the stock as it had increased visibility of profitability going ahead. “Sustained cost control and revenue recovery set the path for re-rating’’, it had said in a client note.Morgan Stanley, which upgraded its target price of Zomato stock from Rs 74 to Rs 85 following the March earnings, sees profitability at the consolidated level for the next four quarters, but was disappointed about the sequential drop in core business GOV (gross order value) and revenue.

The company’s food delivery business reported a revenue of Rs 1,530 crore in the March quarter, compared with Rs 1,284 crore a year ago, and Rs 1,565 crore clocked in the December 2022 quarter. The GOV of the food delivery business for the March quarter was Rs 6,569 crore, down from Rs 6,680 crore in the December quarter, but up from Rs 5,853 crore in the year-ago period.

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