Zomato Stock Rises 6% on Sensex Inclusion, ₹8,500 Cr QIP

Zomato shares shot up by 6% in early trading on November 25, thanks to two big wins—it is being added to the 30-stock Sensex and getting approval for its massive ₹8,500 crore Qualified Institutional Placement (QIP).

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Here’s the deal: Zomato is making history as the first “new-age tech stock” to join the Sensex. It is replacing JSW Steel in the index starting December 23. This move comes after a stellar year for Zomato, with its shares skyrocketing by over 113% so far in 2024. 

The announcement came after Asia Index Private Limited, a BSE subsidiary, updated key indices like BSE 100, BSE Sensex 50, and BSE Sensex Next 50. By 9:20 AM IST, the stock was trading at ₹279.16 on the NSE.

Adding to the buzz, Zomato's shareholders have okayed its ₹8,500 crore fundraising plan through QIP. The company’s board approved this last month to strengthen its financial position. Here’s why they need it: Zomato's cash reserves dropped by ₹1,726 crore in Q2, largely because of its ₹2,014 crore acquisition of Paytm’s entertainment ticketing business. Currently, its cash balance sits at around ₹10,800 crore, down from ₹14,400 crore.

Despite this dip, Zomato has shifted to generating cash since its IPO days and wants to maintain a competitive edge in the tough food delivery market. The company also promised to focus on service quality while staying on equal footing with competitors who are raising funds too.

Looking ahead, Zomato plans to keep its core business margins steady and aims to achieve near breakeven in its quick-commerce unit. It also clarified there are no plans for new acquisitions or minority investments anytime soon.

Analysts are upbeat about Zomato’s future. Akriti Mehrotra from StoxBox highlighted how Zomato’s acquisition of Blinkit has boosted its quick-commerce segment, which has now reached breakeven and is driving profitability. Viral Bhatt from Money Mantra echoed the sentiment, citing Zomato’s strong brand and diversified business model as key growth drivers.

Here’s some perspective: In 2024 alone, Zomato’s stock has soared by 125%, easily outpacing the 11% gain in the BSE Sensex. The stock hit an all-time high of ₹298.20 on September 24. Meanwhile, JSW Steel shares, which are leaving the Sensex, dipped 2% to ₹958.25 today but have gained 9% this year.

In Q2FY25, Zomato posted a net profit of ₹176 crore, up an incredible 388% from the same period last year (₹36 crore). However, it’s down 30% compared to the ₹253 crore profit in Q1FY25. Revenue jumped 68.5% YoY to ₹4,799 crore, fueled by strong performance in key areas. EBITDA also improved to ₹226 crore, largely driven by platform fees and ad revenue, although rising operating costs (like wage hikes and Blinkit expansion expenses) slightly offset these gains.

Zomato’s EBITDA margin rose to 4.7% in Q2FY25, up from 1.7% a year ago. The company expects its going-out segment’s gross order value (GOV) to more than triple from ₹323 crore in FY24 to ₹1,000 crore in the future. There’s also room for growth as Zomato looks to add more features like shopping and staycation bookings.

According to Geojit Financials, Zomato is poised to grow in key areas like order volume, average order value (AOV), and user acquisition—all of which could drive profitability. The management remains confident that the going-out business will stay near breakeven in the short term while delivering strong growth in lifestyle and consumption trends.

Analysts at Elara Capital are equally optimistic, noting that Zomato’s solid execution, improving profitability in segments like Hyperpure, and potential QIP inflows give it a strong market position. They reiterated a ‘buy’ rating for the stock with a target price of ₹320 per share.

In short, Zomato is firing on all cylinders, with analysts expecting continued growth and profitability as it solidifies its place as a major player in the tech and food delivery space.