Zomato extends gain; here’s what Rakesh Jhunjhunwala, other analysts think about the online food delivery firm

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Shares of Zomato extended their rally on Monday after making a robust debut on Dalal Street on Friday. The scrip closed 11.92% higher at Rs 140.85, while the benchmark BSE Sensex settled 0.23% lower at 52,852. Earlier, shares of the food delivery firm climbed 64.74% on listing day against the issue price of Rs 76. The scrip settled at Rs 125.20 on the BSE and at Rs 125.30 on NSE in the previous trading session.

The company’s initial public offering got subscribed by 38 times. The public offer was opened for subscription between July 14-16. Market watchers believe that a key factor for the stock price to sustain the momentum is to demonstrate improvement in profitability in the coming quarters. Some of the analysts think that the company will continue to narrow down its losses and may turn profitable by FY23.

Zomato- A Tulip Mania 

Ace stock picker Rakesh Jhunjhunwala sees ‘tulip mania’ building in the stock market. It is his way of analysing the buzz surrounding Zomato’s debut on the bourses.

On Zomato hitting Rs 1 lakh crore market capitalisation on its listing day, Jhunjhunwala on Saturday said it doesn’t matter how much valuations the newly listed firm has earned. “Show me the cash-flow! Zomato received Rs 1 lakh crore market capitalisation yesterday, but when is it getting Rs 3,000 crore of cash-flow? It doesn’t matter how much valuations you get. What is more important is how long the company lasts.

The world is giving too much valuation to digital change. Such evaluations are not sustainable, in my view,” he said during a keynote address at an event organised by Equirus.

“It is like a tulip mania and I want to be proved wrong,” he added.

Long term bet

Commenting on Zomato post listing, S Ramesh, MD and CEO, Kotak Mahindra Capital Company said, “The stellar debut of Zomato on the domestic bourse after attracting robust subscription is a testimony to the fact that investors are willing to bet big on new-age technology companies which have the characteristics of a disruptive business model. It is also a tribute to Indian entrepreneurship. With growing internet penetration and the number of smartphone user base increasing month after month, the entire private digital ecosystem will enable wealth creation and further deepen of our capital market in the coming years.”

Sneha Poddar, research analyst, broking and distribution, Motilal Oswal Financial Services added that there is a lot of fancy for such a unique and first of its kind listing in the market. Zomato with first-mover advantage is placed in a sweet spot as the online food delivery market is at the cusp of evolution. Though predicting the growth trajectory at this juncture is a little tricky, but it’s a good bet from a long term perspective.