Zomato slipped over 5% on heavy volumes, stock fall below Rs 200 in last 8 months

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). It is in pressure because of higher discounting by Zepto as it was looking to expand its market share post accelerated store expansion.

In the past three 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 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.

Over the  past few  months, Zomato share price drastically  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.

The drop down in prices  has been put down to rising expenses linked to the expansion of its quick commerce platform, Blinkit. Despite of all the profit slump, the food delivery giant saw its revenue grow significantly falling. Zomato's revenue jumped 64.9 per cent to Rs 5,405 crore in the October-December quarter compared to the same period last year, bounce back  strong demand and expansion efforts. 

The Management itself anticipated the losses in Blinkit to continue in the near term, due to vigorous store expansion; it  targets store-count has reached count of 2,000 by December 2025 (vs December 2026 earlier);but the margin expansion is expected to pause temporarily. Due investment in new district is also loss which leads to going out .However , 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. It assures its users that food delivery service would continue under the same brand name.

According to Nuvama Institutional Equities, Blinkit dark store additions are surpassing expectations, thriving for  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 gathering 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. As Per Zomato, aggressive store addition in quick commerce may lead to losses . Meanwhile, the cacophony surrounding discounts by QC firms seems to be raising,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 high rise on key items, (Atta, cooking oil, and pulses). As per Elara Capital’s channel checks, among three key firms, Zepto offers the heavy discounts, 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 deducted approach while scaling.  Deepinder  Goyal (Eternal CEO) says Blinkit has a 2- 3 per cent share in industry cash burns, but grasp 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 endures 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 deliver 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 holder to sustain the burn rates,” analysts at ICICI Securities said in its report.