Zomato slips 5% on heavy volumes, stock falls below Rs 200 after 8 months

The stock hit an intra-day low of Rs 199.75 and has corrected 34% from its 52-week high of Rs 304.50 on concerns around increasing cash burns in Quick Commerce.

Food aggregator Zomato’s share price fell below Rs 200-mark for the first time in the last eight months, as the stock slipped 5 per cent to Rs 199.75 on the BSE in Tuesday’s intra-day trade amid heavy volumes on concerns around increasing cash burns in Quick Commerce (QC). This was mostly on account of higher discounting by Zepto as it was looking to increase market share post accelerated store expansion, according to analysts.

 

In the past three trading days, the stock has declined 11 per cent. It was trading at its lowest level since July 1, 2024. The stock has corrected 34 per cent from its 52-week high of Rs 304.50 touched on December 5, 2024.

 

At 01:20 PM: Zomato share price was quoting 3.5 per cent lower at Rs 204, as compared to 0.10 per cent decline in the BSE Sensex. The average trading volumes at the counter jumped 1.5 times, with a combined 85.04 million equity shares changing hands on the NSE and BSE.

 

In the past two months, Zomato share price declined 18 per cent after the company reported a 57 per cent drop in consolidated net profit to Rs 59 crore for the third quarter of financial year 2024-25 (FY25). The company reported Rs 138 crore in net profit during the same period last year. Sequentially, net profit fell 66.5 per cent from Rs 176 crore reported in Q2FY25.

 

This drop in profit has been attributed to rising expenses linked to the expansion of its quick commerce platform, Blinkit. Despite the profit slump, the food delivery giant saw its revenue grow significantly. Zomato's revenue surged 64.9 per cent to Rs 5,405 crore in the October-December quarter compared to the same period last year, reflecting strong demand and expansion efforts.   ALSO READ: Graphite India, HEG shares surge up to 9% in weak market; here's why

 

The management expects the losses in Blinkit to continue in the near term, due to aggressive store expansion; it now targets reaching store-count of 2,000 by December 2025 (vs December 2026 earlier); but the pause in margin expansion is expected to be temporary. Going Out also reported a loss, due to investments in the new District app, according to analysts.

 

Meanwhile, Zomato has officially received shareholder approval to change its corporate name to Eternal, marking a significant step in the company's bid to diversify its QC operations. However, the change only applies to the corporate entity and not to the Zomato brand or app. The company reassured users that its food delivery service would continue under the same well-known name.

 

According to Nuvama Institutional Equities, Blinkit dark store additions are outpacing expectations, driving faster growth while profitability may face short-term delays due to higher upfront costs for store openings. The brokerage firm believes this bunching up of cost for dark store addition shall hurt profitability in the short-term, but shall ultimately lead to bunching up of profitability in future quarters as these stores mature.

 

Analysts at Elara Capital downgraded Zomato’s FY26E/27E EPS estimates by 8.9/ 5.4 per cent given rapid expansion and delayed profitability in the quick commerce segment. Strained Q3 earnings were led by losses in quick commerce and slower GMV growth in Food Delivery. Per Zomato, aggressive store addition in quick commerce may lead to losses therein. The brokerage firm does not expect quick commerce to be hit much by the entry of e-commerce, as both will coexist due to niche propositions.  ALSO READ: US Recession? Nifty IT can tank another 10%; key levels on tech stocks here

 

Meanwhile, the cacophony surrounding discounts by QC firms seems to be increasing, as the All-India Consumer Products Distributors Federation (AICPDF) has filed a petition with the Competition Commission of India (CCI) to regulate QC platforms over alleged price-cutting, demanded a minimum support price (MSP) on Maximum Retail Price (MRP), citing adverse impact on Kirana stores in Tier 1 cities.

 

Given grocery makes up 80-90 per cent of QC order value, discounts are higher on key items, (Atta, cooking oil, and pulses). As per Elara Capital’s channel checks, among three key firms, Zepto offers the highest, followed by Instamart and Blinkit. The brokerage firm does not expect a prolonged discount regime, given rising pressure for profitability on listed QC firms, while Zepto may slow after the IPO. Increased discussion over profitability could force a calibrated approach while scaling.  Deepinder Goyal (Eternal CEO) says Blinkit has a 2- 3 per cent share in industry cash burns, but holds a 40-45 per cent GMV share, showing focus on profitability, analysts said in a recent report.

 

Given the increased cash burn in the QC business, investors have deeply discounted quick commerce valuations citing increasing competitive intensity and high cash burns in the space. However, ICICI Securities said it’s on the ground checks (across 4 locations in each of the top 8 metros) reveal that while some discounting still persists in the space, item level discounting is past the peak levels seen from November 2024-January 2025.

 

“We think the recent market correction has clearly conveyed investor preference for sustainable growth. Therefore, red ocean strategies are unlikely to be sustained given that would erode valuation for the space overall and make it very difficult to raise fresh funds for incumbents to sustain the burn rates,” analysts at ICICI Securities said in its report.