In recent months, many mutual funds have invested heavily in Zomato, buying shares worth ₹10,200 crores. This has made Zomato the most liked stock in the December quarter. Just last month, mutual funds purchased 145 crore shares for about ₹24,000 crores! Their share in Zomato has jumped from 13.57% to 16.42%. More mutual fund schemes have also started investing, rising from 36 to 38.
Some big mutual funds investing in Zomato include Nippon India Growth Fund, UTI Flexi Cap Fund, Axis Bluechip Fund, Kotak Flexicap Fund, and ICICI Prudential Balanced Advantage Fund. However, foreign investors are not as excited; they have reduced their holdings in Zomato from 52.53% to 47.31%.
Last week, a global equity expert named Chris Wood from Jefferies cut down his investment in Zomato by 1%. He believes Zomato has a bright future, but it also faces fierce competition. Jefferies lowered the target price for Zomato stock from ₹335 to ₹275. Even though Zomato’s stock price might double in 2024, they think 2025 will be a year of fewer big changes. Rising competition could lead to more discounts, which could hurt profits in the medium term.
Zomato’s quick delivery service, Blinkit, is competing against new players like Zepto and established ones like Flipkart and BigBasket, and this might affect their profits. Blinkit plans to double its stores by 2024-26, but companies like Amazon and Reliance are also jumping into quick delivery, making the competition even tougher.
Despite these challenges, ICICI Securities believes Zomato and its rival Swiggy will do better than most other companies by 2025. However, they prefer Swiggy for now because of better deals and a growing preference among restaurants for Swiggy. They see a 46% growth potential for Swiggy versus 27% for Zomato.
Elara Capital’s Karan Taurani thinks Blinkit will stay strong in the industry, even with Swiggy’s rise. They are believed to hold onto their market share thanks to their higher average order values and larger selection of items.
(Disclaimer: The suggestions and views expressed here are from analysts and do not necessarily reflect the views of NiftyStat.)
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