Shares of Zomato opened higher on December 22, a day after CEO Deepinder Goyal denied reports of his company looking to acquire Shiprocket for $2 billion.
"We have noticed that there are certain news articles circulating in the mainstream media with the subject 'Zomato offers to acquire Shiprocket for $2 billion'. We deny this statement and would like to caution investors against such incorrect news floating in the market," Goyal said in a post on X (formerly Twitter).
Zomato remains focused on its existing businesses with no plans for any acquisition at this moment, Goyal said. "Kindly note that the company is clarifying this information out of abundant caution, given the large size of the deal mentioned in the news article and the uncertainty that it may create in the market."
At 10:00 am, Zomato share were trading over 1 percent higher at Rs 128.85 on the National Stock Exchange (NSE).
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Shiprocket is a B2B logistics technology start-up that provides shipping and fulfillment services to direct-to-consumer (D2C) brands and omnichannel sellers across categories such as apparel, electronics, beauty and personal care, and grocery. It has offerings including discovery, order management, warehouse and fulfilment, shipping, order tracking, and returns.
Ahead of Zomato's clarification, Jefferies said in a report that the Shiprocket deal is unlikely. Zomato already owns a 5 percent stake in the company, following an investment in 2021. According to them, if the acquisition goes through, Zomato's shares could trade "weak" since on the face of it this seems an unrelated acquisition even though quick commerce and hyperpure may have some linkages.
The international brokerage ascribed a low probability of the deal as it feels that management's hands are full with quick commerce. According to analysts, Zomato has been acquisitive in the past and made a few investments that were seemingly less relevant. The company also carries $1.4 billion on its books, with existing businesses not likely to require significant investment.
"With the management mindset of growth, new lines of business, whether organic or otherwise is not ruled out. However, with Q/C requiring management bandwidth and food delivery still ramping up on profitability, we think management's hands are full," Jefferies said.
Also read | Zomato unlikely to buy Shiprocket, deal could cause share to trade weak: Jefferies
"Hence, diversification seems very unlikely to us at this stage," Jefferies stated in a report. The brokerage has a 'buy' rating on the stock with a target price of Rs 165 per share.
On December 21, Zomato shares ended 2.2 percent higher at Rs 128.20 on the National Stock Exchange (NSE). So far in 2023, the stock has given multibagger returns, rising up to 112 percent. In comparison, the benchmark Nifty 50 has risen around 15 percent.
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