Shares of food delivery firm Zomato on Tuesday fell by 8.05% to Rs 60.55 from Rs 65.85 a day ago after it announced a deal to buy grocery-delivery startup Blinkit, Reuters reported. Zomato’s stocks have fallen by 14% in two days, Mint reported.
Zomato had said on Friday it would buy Blinkit for Rs 4,447 crore, according to Reuters. Business analysts claim that Zomato’s deal has made investors apprehensive.
The investors are now waiting to see how the acquisition works out for the food delivery firm in the competitive quick-commerce sector.
“This high cash burning sector houses fierce competition from the likes of Zepto, Dunzo, Swiggy Instamart, BigBasket, etc and it will be interesting to see how this expensive investment by Zomato pans out in the future,” said Shivam Bajaj, founder of Avener Capital, Mint reported.
Brokerage firm Edelweiss said that as Swiggy has become successful in the grocery market, Zomato will have to match the delivery costs.
“Zomato’s management has assigned an upper bound of $400 million [Rs 31,376 crore] towards quick commerce investment for the next two years,” Edelweiss said. “Any deviation from this would be a key risk to our hypothesis.”
Analysts at Kotak Institutional Equities said that Zomato may require more than Rs 31,376 crore, if it acquires Blinkit, given the rising competitiveness in the sector, Reuters reported.
“E-grocery economics have been tough to crack given price competition, relatively lower margin nature of the category, high number of products per order which need efficient fulfilment, and very high competition,” Kotak analysts said.
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