Shares of online food delivery platform Zomato closed 6.6 percent down, at ₹65.85 on the NSE on Monday after the company’s board approved the acquisition of hyper-local grocery delivery app Blinkit in an all-stock deal for ₹4,447 crore.
The scrip had a positive start in the early trade opening over 3 percent higher at ₹73 apiece but failed to hold the gains even as benchmark Nifty50 index surged about 1%.
The stock has been hovering around its 52 week low at 50.05 and it is still available at over 60 percent discount from its one year peak.
Brokerage house JM Financial has maintained a ‘buy’ call on Zomato shares with a target price of ₹115 per share and the closing market price of the stock is Rs. 66.05. The analyst is given the time period of one year when the stock price can achieve the set target.
According to brokerage, quick commerce space in the long run can offer a large complimentary profit pool for players like Zomato. The Blinkit acquisition is near term pain but long term gain for the online food aggregator. “Despite management optimism, we conservatively build forecasts for Blinkit due to limited data and base DCF, ascertain that the acquisition can add >8% value to our published TP of ₹115 for Zomato,” they said, implying 63% upside on the stock.
We believe Zomato is well-placed to gain from robust industry tailwinds for hyperlocal delivery services, it said. "Zomato's proposed acquisition of Blinkit not only widens its scope of hyperlocal delivery services beyond food delivery but also highlights management's broader ambitions of capturing a larger slice of India's Commerce market pegged at $1.3 trillion," said JM Financial.
An average of 17 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.