Zomato Shares have fallen by over INR 10K Cr in 3 consecutive days after the Blinkit acquisition.
- ByStartupStory | June 30, 2022
Zomato shares dropped for a third straight day on Wednesday, June 29, after it was announced that it was buying fast-growing company Blinkit. They dropped more than 5% to INR 57.20 on the NSE. In the three trading sessions following the announcement, the meal delivery firm has already lost almost INR 10,250 Cr of its market capitalization. According to the BSE, the startup’s current market capitalization is INR 45,116 Cr.
After market hours on Friday, June 24, Zomato declared that its board has authorised the purchase of Blinkit for INR 4,447 Cr ($568 Mn) in an all-stock transaction. Since Monday, the startup’s shares have been sliding, down over 19 per cent in three sessions.
Deepinder Goyal, the founder and CEO of Blinkit, explained how it relates to Zomato’s operations by pointing out that, like food delivery, Blinkit is a hyperlocal company that meets consumer demand for prompt product delivery.
The fall in share prices suggests that investors are not as confident about the purchase adding value to the business, even though various stock research firms and their experts claimed that the deal would increase Zomato’s business in the long run. Analysts claim that Zomato’s decision to add another loss-making company to its portfolio has damaged investor confidence. The investors have become more apprehensive due to the potential for a bigger cash burn.
The stock has already been lowered by Kotak Institutional Equities Research to “add” from “buy,” and the fair value estimate has been reduced from INR 83 to INR 77. The research company continued, “We estimate Blinkit will require investments beyond the $400 Mn envisaged by Zomato given increased competitive intensity.” Also, Zomato stock has decreased by nearly 60% so far in 2022.
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