ZOMATO Complete Report: Is Zomato a Good Buy in 2024?
“Good food is the foundation of genuine happiness,” Zomato proclaims. Yet, for investors, the question remains: Will Zomato’s shareholders find the same joy in the future? Is Zomato a Good Buy? The rapid ascent of food delivery apps has captured investors’ attention, especially with Zomato being the sole publicly traded food delivery company. But what does the future hold for Zomato amidst intense competition? Let’s explore Is Zomato a Good Buy?
Industry Outlook –Is Zomato a Good Buy?
The online meal delivery sector is on a steady growth path, projected to generate $44 billion in revenue by 2024, with a compound annual growth rate (CAGR) of 16.14% over the next five years. By 2029, this market is expected to reach $92.5 billion. In India, the grocery delivery market is also thriving, with a forecasted growth rate of 30.7% in 2025, reaching $30.65 billion in 2024. This growth is fueled by increasing internet penetration in tier 2 and tier 3 cities and a rising demand for convenience.
Company Overview
Founded in 2010, Zomato has evolved into a tech giant, providing a platform that connects customers with restaurant and delivery partners. Beyond food delivery, Zomato allows users to write reviews, upload photos, locate restaurants, and order daily essentials online. The platform also offers dine-out options and discounts on food bills.
For restaurant partners, Zomato provides targeted marketing solutions to attract and retain customers, along with a B2B business model called Hyperpure, which supplies premium ingredients and kitchenware. Zomato holds a dominant 55% market share in meal delivery and leads the grocery delivery business through Blinkit with a 45% market share.
The IPO Effect-Is Zomato a Good Buy?
Zomato’s IPO journey has been turbulent. Initially listed at ₹116, the share price fell to nearly ₹40 before rebounding to over ₹200 as the company achieved profitability. This volatility reflects the market’s reaction to Zomato’s financial performance and strategic decisions.
Financial Highlights –Is Zomato a Good Buy?
Zomato’s financial performance has seen remarkable improvement over recent years:
| Financial Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 2,605 | 1,994 | 4,192 | 7,079 | 12,114 |
| Net Profit (₹ Cr) | -2,386 | -816 | -1,222 | -971 | 351 |
| Operating Profit Margin (%) | -88% | -23% | -44% | -17% | 0% |
| Return on Equity (%) | -200% | -22% | -10.79% | -5.79% | 1.76% |
| Earnings per Share (₹) | -70,096 | -23,123 | -1.54 | -1.14 | 0.40 |
| Gross Order Value (₹ Cr) | 11,221 | 9,483 | 21,297 | 26,305 | 32,224 |
Future Plans –Is Zomato a Good Buy?
Zomato is poised for significant market share and profitability expansion. The company aims to fortify its position in the direct-to-consumer (D2C) space through Blinkit and its core food delivery business. Blinkit, now present in 26 cities, focuses on expanding in the top eight cities in India. Zomato plans to enhance its store footprint and gross order value in major cities like Bengaluru, Mumbai, and Delhi NCR.
ESG Initiatives-Is Zomato a Good Buy?
Zomato’s commitment to environmental, social, and governance (ESG) principles has resulted in an improved ESG rating from ‘medium risk’ to ‘low risk’ by Sustainalytics. Zomato aims to achieve net-zero emissions across its food delivery value chain by 2033. Additionally, the company has trained over 20,000 delivery partners in first-aid and CPR, enhancing their on-road safety capabilities.
SWOT Analysis-Is Zomato a Good Buy?
Strengths:
- Extensive network of restaurant and delivery partners.
- Leading position in a duopoly with Swiggy.
- Growing internet penetration and rising family incomes in tier 2 and tier 3 cities.
Weaknesses:
- Intense competition from well-funded players like Reliance and Tata.
- Price-sensitive customer base in India.
Opportunities:
- Expansion in the D2C space with Blinkit.
- Increasing demand for convenience and variety in cuisines.
Threats:
- Entry of new, powerful competitors.
- Regulatory changes and economic fluctuations.
Key Metrics
| Metric | Figure |
|---|---|
| Market Capitalisation (₹ Cr) | 1,63,078 |
| Current Market Price (₹) | 198 |
| Price to Earnings Ratio | 465 |
| Price to Book Value (₹) | 23.1 |
| Stock All-Time High/Low (₹) | 207 / 72.6 |
| Dividend Yield (%) | 0.00 |
| FII Holdings (%) | 55.11 |
| DII Holdings (%) | 15.28 |
Target Price –Is Zomato a Good Buy?
Analysts maintain a positive outlook for Zomato. Geojit BNP Paribas has set a target price of ₹220, while Emkay Global recommends ₹230. ICICI Securities is the most optimistic, setting a target price of ₹300, citing Zomato’s potential growth in the food and grocery delivery market.
Conclusion –Is Zomato a Good Buy
Zomato’s competitive edge and strategic expansion plans position it well for future growth. However, the landscape remains challenging with the entry of formidable competitors. How Zomato navigates these challenges will determine if shareholders will indeed find genuine happiness in the years to come. In a price-sensitive market like India, balancing convenience with cost will be crucial to Zomato’s success.For more company overview please click here
Disclaimer
Investing in stocks involves risks, including the loss of principal. The performance of ZOMATO, like any other company, is subject to various market conditions and economic factors. Potential investors should conduct their own research, consider their own financial situation and risk tolerance, and consult with a financial advisor before making investment decisions. Past performance is not indicative of future results. Invest at your own risk.
Frequently Asked Questions (FAQs) –Is Zomato a Good Buy
What are the main growth drivers for Zomato in the coming years?
Zomato’s growth will be driven by increasing internet penetration in tier 2 and tier 3 cities, expanding market share through its Blinkit platform, strategic marketing solutions for restaurant partners, and the rising demand for convenience in food and grocery delivery.
How does Zomato plan to compete with major players like Reliance and Tata in the food delivery market?
Zomato plans to compete by leveraging its established network of restaurant and delivery partners, enhancing its market presence in top cities, focusing on profitability, and continuing to innovate with services like Hyperpure and Blinkit for premium ingredients and fast deliveries.
What financial improvements has Zomato made recently?
Zomato has seen significant financial improvements, including increased revenue from ₹2,605 crore in 2020 to ₹12,114 crore in 2024, a shift from a net loss of ₹2,386 crore to a net profit of ₹351 crore, and an improved operating profit margin from -88% to 0%.
What is Zomato’s approach to environmental, social, and governance (ESG) issues?
Zomato is committed to ESG principles, aiming to achieve net-zero emissions by 2033 and improving its ESG rating from ‘medium risk’ to ‘low risk’. The company also trains delivery partners in first-aid and CPR, enhancing their safety and preparedness.
What are the target prices set by analysts for Zomato’s stock?
Analysts have set various target prices for Zomato’s stock: Geojit BNP Paribas at ₹220, Emkay Global at ₹230, and ICICI Securities at ₹300. These targets reflect optimism about Zomato’s growth potential in the food and grocery delivery market.
How does Zomato plan to increase its gross order value (GOV) in major cities?
Zomato aims to increase its GOV by expanding its store footprint and enhancing service efficiency in major cities like Bengaluru, Mumbai, and Delhi NCR. The company plans to focus on underpenetrated areas to bring their GOV on par with its most successful markets.
