Kotak sees lower GMV for Zomato in short term, cuts target price to Rs 85

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26 Aug, 2025 12:21

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Predicting a subdued gross merchandise value (GMV) in the near term amid weaker demand, brokerage firm Kotak Institutional Equities has cut the target price on the shares of Zomato Ltd.

Kotak has cut its target price to Rs 85 a share from Rs 100 earlier targeted. The target still suggests a 45 percent potential upside from Wednesday's trading price of Rs 59.20 apiece.

"Our conversations with industry participants indicate that food delivery GMV growth may remain subdued in the near-term owing to weak demand. As a result, we trim GMV growth forecasts for Zomato’s food delivery segment. We like Zomato’s comfortable market share position in a duopolistic market and believe the Indian delivery market has legs to grow, near-term slowdown notwithstanding," Kotak Institutional Equities said in a note to investors.

After Zomato posted a 35 percent year-on-year food delivery GMV growth in the first half of FY23, the brokerage firm anticipates it to decelerate to 21 percent on-year in the second half of FY23. Although AOVs are likely to hold up due to inflation and relatively higher delivery charges, slower growth in orders will lead to slower GMV growth, Kotak said.

"This, in turn, is owing to weak consumer demand in what otherwise is a seasonally strong quarter for outdoor food consumption. We reckon the weakness is pan-India, with a slowdown in demand in metro and non-metro geographies. The fact that restaurant chains are also witnessing a slowdown, indicates the slowdown is across channels and delivery is not necessarily losing share to in-store dining," Kotak said in a report.

According to a Jefferies note on December 19, the brokerage firm has removed Zomato from its India Model Portfolio because it wanted to add weight to the metals sector, with China reopening and the expectation of peaking of interest rates in the US.

“For the tactical move (exiting Zomato), we are incrementally wary of a potential rise in competitive activity in the sector… As its chief competitor, Swiggy, has recently seen market share loss,” wrote Jefferey's Mahesh Nandurkar and Abhinav Sinha in the report.