Ant-backed Zomato Loses $1.1-billion Market Value In Just Two Days

Zomato lost about $1.1 billion of market value in two days after the food-delivery platform announced the acquisition of loss-making quick-commerce firm Blink Commerce – a move some analysts said will weigh on future growth.

Zomato – among the first-generation of internet unicorns to tap into India’s capital market – tumbled 8.4 per cent in Mumbai trading on Tuesday on top of a 6.6 per cent drop on Monday.

The two-day fall to Rs 60.3 put shares 21 per cent below the initial public offering (IPO) price.

The acquisition will increase Zomato’s operating loss to fund activities of Blink and its Blinkit application, “shifting the path to profitability back by another year”, Rahul Jain, an analyst at Dolat Capital Market, said in a note.

The successful listing of Zomato last year set the tone for IPOs of a number of Indian unicorns, including digital-payments firm Paytm’s parent One97 Communications. However, doubts have been raised about the valuations of the so-called new-age technology firms – as well as about their business models – with many companies still making losses and turning to the inorganic route of acquisitions to expand.

Zomato, backed by Sequoia Capital and Jack Ma’s Ant Group Co. (formerly known as Ant Financial), among others, first invested in Blink in August 2021.

The company said the acquisition will help it increase its hyperlocal delivery fleet and reduce some costs.

The acquisition widens Zomato’s scope beyond food delivery and “highlights the management’s broader ambitions of capturing a larger slice of India’s $1.3-trillion commerce market”, Swapnil Potdukhe, an analyst at JM Financial Institutional Securities, said in a note.

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor