How Zomato’s stellar stock performance in FY24 drove Nifty 500 gains

Just two years ago, D-street was buzzing with the ‘inside’ joke about Zomato being cheaper than tomatoes. Its stock had tanked to Rs 62 or thereabouts from a peak of Rs 169, while a kilo of tomatoes was selling at ~Rs 70 in the local mandi. Ace investor and markets veteran Shankar Sharma, known for his bearish outlook on tech stocks, even went on record to say, “I would rather buy tomatoes instead of [the] Zomatos of the world.”

Things worsened over the next two months as D-street gave a big thumbs-down to Zomato’s expensive (Rs 4,447 crore) acquisition of loss-ridden Blinkit, which was also riddled with corporate governance issues at the time. Then came the end of the pre-IPO lock-in period, resulting in a hurried sell-off by investors that saw Zomato stock falling further to an all-time low of Rs 46 on the BSE in July 2022. 

While retail investors whined about the massive erosion of wealth, brokerages pilloried the foodtech major for its inability to reduce burn and figure out a sustainable path to profitability. 

Cut to 2024, and the tide has turned dramatically for Zomato. 

Earlier this week, the company reported its fourth successive quarter of profit, with the once-maligned Blinkit emerging as its crown jewel. So much so that analysts now estimate that Zomato’s quick commerce biz will surpass its core food delivery operations soon. The stock is nearing Rs ~200, and almost all brokerages—domestic and international—see further upside of 30-50% in the next 12 months.