Zomato’s recent moves, including a Qualified Institutional Placement (QIP) announcement, have caught the attention of major brokerages. With varying views on the company’s strategy and growth outlook, analysts are either optimistic about its potential or expressing caution. Here’s a summary of the latest ratings:
Jefferies: Maintain Buy, target price Rs 335, sees 19% upside
Jefferies has maintained its Buy rating on Zomato, with a target price of Rs 335, implying a 19% upside. The brokerage highlighted Zomato’s surprising QIP announcement, despite having $1.2 billion on its books and rising free cash flow (FCF). Media reports suggest that Zomato is looking to raise $1 billion, while also applying to the Reserve Bank of India (RBI) to cap Foreign Institutional Investor (FII) holdings at 49%.
Jefferies believes that if this move is confirmed, Zomato will convert into a “domestic” company, allowing it to implement a 1P (inventory) model in quick commerce, which is expected to boost profitability. The brokerage also noted that Zomato’s shift could result in stock deletion from MSCI, though this will depend on the FII cap implementation.
BofA: Maintain Buy, target price Rs 325, sees 17% upside
Bank of America (BofA) also maintains a Buy rating on Zomato, with a target price of Rs 325, indicating a 17% upside. BofA highlighted that Zomato is looking to raise equity in the range of $450-500 million, according to media reports. The brokerage sees Zomato’s focus on 50%+ domestic ownership and scaling up other verticals as positives.
However, BofA cautioned that the quick commerce industry is likely to face increased competition in the next 6-12 months, which could pose challenges for Zomato. Despite this, the brokerage believes the company is well-positioned to navigate the competitive landscape and emerge stronger.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Please consult a financial advisor before making any investment decisions.
