353 million shares of Zomato change hands on NSE; stock trades firm

Shares of Zomato were trading firm on the National Stock Exchange (NSE) on Wednesday after 4 per cent equity of the food delivery firm changed hands via block deals. The stock of the food delivery firm rallied 5 per cent to Rs 66.80 in the intra-day trade.

Around 353 million shares, representing 4.13 per cent of total equity of Zomato, changed hands on the NSE in early trade, the exchange data shows. The names of the buyers and sellers could not be ascertained immediately.

However, according to media reports, Alibaba Group Holding Ltd plans to sell a stake of about 3 per cent in Indian food delivery firm Zomato worth $200 million through a block deal. The Chinese e-commerce giant, through its finance affiliate Ant Group, owns a 13.3 per cent stake in Zomato.

In the past six months, the stock has underperformed the market by falling 11 per cent as compared to 12 per cent rally in the S&P BSE Sensex. Moreover. in the past one year, it has more-than-halved by falling 58 per cent, as against 10 per cent rise in the benchmark index.

Zomato reported remarkable improvement in profitability in the September quarter (Q2) with adjusted Ebitda loss for the core business (ex-Blinkit) narrowing down to Rs 60 crore versus Rs 150 crore in Q1FY23 (Rs 310 crore in Q2FY22). Importantly, Food Delivery segment turned profitable (at adj. Ebitda level) on the back of sharp improvement in contribution margin to 4.5 per cent from 2.8 per cent in Q1.

Analysts at JM Financial expect the core business (ex-Blinkit) to turn profitable at adj. Ebitda levels in H1FY24, in-line with management guidance of profitability latest by Sep’23.

“Blinkit’s adj. EBITDA margin of -17.5 per cent in Q2 was also a sharp improvement over -27.8 per cent for Q1FY23 and was driven by 10 ppts improvement in contribution margin (-7.3 per cent in Q2 versus -17.3 per cent in Q1) and operating leverage. However, given the relatively nascent size of the business, high competitive intensity and no prior precedence of a similar business model turning profitable globally,” the brokerage firm said. It forecasts the segment to turn profitable only in FY26.