Shares of food aggregator Zomato surged as much as 6 percent in opening trade on November 25 on the back of two key positives--its inclusion in the 30-stock Sensex and an approval for its Rs 8,500 crore Qualified Institutional Placement (QIP).
At 09.20 am, shares of Zomato were trading at Rs 279.16 on the NSE.
Following the recent rejig of the BSE Sensex, Zomato emerged as the first new-age tech stock to gain an inclusion as it is set to replace JSW Steel in the 30-stock index from December 23. The inclusion came at a time when shares of Zomato have recorded a staggering rally, surging over 113 percent in the year so far.
Asia Index Private-- BSE's wholly-owned subsidiary, announced the reconstitution of key indices, including BSE 100, BSE Sensex 50, and BSE Sensex Next 50, on Friday.
Meanwhile, the company's shareholders also gave a greenlight to its Rs 8,500 crore fundraise through the QIP mode. Last month, Zomato's board had also approved this fund raise to bolster its balance sheet. The company had revealed that its cash reserves fell by Rs 1,726 crore during the September quarter, primarily due to the Rs 2,014 crore acquisition of Paytm’s entertainment ticketing business.
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Zomato’s cash balance now stands at around Rs 10,800 crore, down from Rs 14,400 crore, following investments in quick commerce and acquisitions. While the business has transitioned to generating cash since its IPO days, the company aims to strengthen its cash position to compete effectively in a challenging market.
Zomato also reiterated that service quality remains the key to success but noted the importance of maintaining a level playing field with competitors securing additional capital. The food delivery aggregator also guided for steady margins in its core business and near-adjusted EBITDA break-even for quick commerce, with no plans for further minority investments or acquisitions.
A similar optimism for Zomato was also seen among analysts. Akriti Mehrotra, Research Analyst, StoxBox believes that Zomato has been able to manage its costs effectively and is growing efficiently, especially following its acquisition of Blinkit, which has strengthened its quick commerce business. :Notably, Blinkit has reached its breakeven point, contributing to the overall profitability and stability of Zomato's operations," Mehrotra noted.
On the other hand, Viral Bhatt, Founder of Money Mantra believes Zomato's diversified business model and strong brand position offer potential for growth.
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