Aswath Damodaran, Rakesh Jhunjhunwala vindicated as Zomato tanks 12% more

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26 Aug, 2025 12:21

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In a perfect I-told-you-so moment, shares of food delivery platform Zomato on July 26 slumped 12 percent to close to Rs 41 apiece, vindicating Aswath Damodaran, who said last year that the stock was not worth more than Rs 41.

Damodaran, a professor of finance at New York University often described as Valuation Guru, had said the Zomato’s initial public offering price of Rs 76 was “too expensive”.

“The value that I derive for equity is close to Rs 39,400 crore, translating into a value per share of Rs 41,” he said.

Zomato on July 26 slipped to Rs 41.40 on the BSE, down over 12 percent and very close to what Damodaran said the stock was worth. The stock is down 76 percent from its peak.

Ramdeo Agrawal and Rakesh Jhunjhunwala, two of the most successful investors on Dalal Street, also publicly ridiculed the pricing of the company at the time of its IPO.

At that time, the market ignored their assessment and the stock rallied to as high as Rs 169 a share, over four times the value Damodaran assigned to the shares.

Damodaran had later said the price was not sustainable.

What is more, the selling in recent days has happened at huge volumes and delivery percentages. On July 25, the delivery volume was nearly 40 percent, nearly twice that of the last month’s average.

On July 26, the delivery was close to 50 percent on the National Stock Exchange. The increase in delivery volumes indicated the strength of the trend—and the trend is downward.

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The trigger for the recent sell-off has been the completion of one year of Zomato’s listing on the stock exchanges, which freed 78 percent of its shares that had been locked in due to regulations.

Its fall has been punctuated by the absence of a credible profitability plan and by what some market participants termed some missteps in its Blinkit acquisition. Jefferies on July 25 said the selling was likely driven more by fear of missing out (FOMO).

Worries over the US Federal Reserve’s policy tightening and investor focus on cash flows have weighed on internet stocks across the world, including the food technology segment to which Zomato belongs.

Jefferies, though, is still bullish on Zomato. In a note, it said: “night is darkest just before dawn” and added that the stock was its conviction buy.

“From exuberance at the time of listing last year, Zomato is now unloved, having underperformed peers year to date. Blinkit acquisition elongates path to profitability and despite management guidance on a break-even in food delivery, investors are not giving much benefit of doubt. We think this makes for a great case for long-term investors to buy,” said Vivek Maheshwari, equity analyst at Jefferies.

He has a target of Rs 100 on the counter, which translates into a potential upside of 144 percent from current levels.

Disclaimer: The views and investment tips of experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.