HSBC values Info Edge's stake in Zomato at $1.1 billion; stock jumps 5%

Info Edge shares advanced 4.8 per cent to hit a high of Rs 3,462 per share on the BSE on Wednesday after a HSBC report said it valued the company's share in food delivery app Zomato at $1.1 billion. Besides, in a blue-sky scenario, India food delivery could be valued at $30 billion in the long term, implying Info Edge’s share in Zomato at $3.5 billion.

"Among all the potential positive triggers for the IE’s share, Zomato is the most critical. While other companies such as Naukri and Policybazaar are great assets for IE, Zomato can significantly impact it’s valuation in the coming years," the report said. It said this is an increase of $2.4 billion or 45 per cent of Info Edge's market cap. In that scenario, Zomato could be valued at $15 billion.

HSBC Global Research, in its recent report, valued food delivery firm Zomato at $5 billion, a major increase from its earlier valuation of $3.5 billion. Info Edge owns 27.6 per cent stake in Zomato. The report assumes the food delivery industry presently is valued at over $10 billion. However, this adds only $1.1 billion to the valuation of IE (Rs 750 per share). READ MORE HERE

"We believe the two main growth drivers for online food aggregators going forward will be their ability to 1) penetrate further in the large long-tail of lower tier cities and 2) leverage the cloud kitchens that offer a differentiating proposition of standardised/curated food meals at reasonable prices. Further, both these factors also tend to offer better business economics, which is crucial to the growing discussion on ensuring sustainable profitability," said analysts at JM Financial in a rpeort dated August 10. 

The online food delivery market for aggregators in India in gross merchandise value (GMV) terms was worth $ 3.6bn in FY20. We expect it to grow to $8.6bn by FY25 (CAGR of 19%), despite the likely decline in the market size in FY21 due to the on-going pandemic. This growth is likely to be driven by an increase in both volume (over 12 per cent CAGR) as well as average order value (over 7 per cent CAGR), it said.

In an August 30 report, Dealmoney Financial Services said Info Edge is one of the very few profitable pure play internet companies in the country. 

"We remain bullish on Info Edge limited. Given the valuations are lofty due to the recent run up we believe the above triggers can help in capturing decent return. We recommend buy on Info Edge India Limited with a price target of Rs 3,760," it said.

The Board is scheduled to meet on September 7 to approve the financial result for quarter ended June 30, 2020.

In August, the Fund Raising Committee of Info Edge determined and approved the issue price for 60,67,961 Equity Shares to be allotted to eligible qualified institutional buyers at a price of Rs 3,090 per equity share (including a share premium of Rs 3,080 per equity share), which includes a discount of 2.74 per cent (i.e. Rs 87.18 per equity share), to the floor price of Rs 3,177.18 per equity share.

At 1:50 pm, the stock was ruling 4.6 per cent higher at Rs 3,452 per share, as against 0.03 per cent rise in the S&P BSE Sensex.