The Indian ‘Food Delivery’ industry is poised for significant growth in the upcoming financial years and is expected to reach a valuation of $18.1 billion by FY25, showing a compounded annual growth rate (CAGR) of 12.2 percent from $10.2 billion five years ago.
Some of the most important growth drivers include the increased internet and smartphone penetration, the rise of digital technology, and the convenience offered by food delivery apps.
In addition, the ‘platform-to-consumer delivery’ concept is experiencing the strongest growth, with a CAGR of around 100 percent between FY16-20, and expects to continue the same at a CAGR of approximately 15 percent to reach a $9.7 billion valuation by FY25.
Zomato Limited, one of the well-known and sole food delivery app company listed on the stock exchanges, has been a turnaround story as far as its operations and fundamental financials are concerned.
For the third straight quarter, Zomato registered a consistent increase in its after-tax profit numbers, turning profitable in the June 2023 quarter by marking bottom-line numbers of Rs 2 crores.
The same rose to profits of Rs 36 crores in the September 2023 quarter and sharply surged to net profits of Rs 138 crores during the latest reporting quarter, i.e., the quarter ended December 2023.
Along with the positive movements in the company’s financials, a positive sentiment was created around the company’s stock, and since the announcement of June quarter results, the company’s stock has proven to deliver multibagger returns of approximately 103 percent to its shareholders.
The same as discussed above means that if someone had invested Rs 1 lakh into the company’s stock since the declaration of the June 2023 quarter results, it would have converted to Rs 2.03 lakhs.
One of the recent developments in the industry also includes Goldman Sachs, a leading Global Financial Institution delivering various financial services, commenting about “Blinkit”, a subsidiary company owned by Zomato way back in 2022 for around USD 570 million in an all-stock deal, being more valuable than its parent company itself.
Goldman Sachs valued Blinkit at approximately USD 13 Bn and the upgrade is supported by larger market potential, higher gross order value (GOV) estimates, and improved industry structure.
Having a positive outlook for the company, ICICI Securities, one of the well-known Domestic Brokerages in India, gave a ‘Buy’ call on the stocks of Zomato Limited and gave a target price of Rs 300 indicating a potential upside of up to 55 percent compared to Tuesday’s closing price of Rs 193.
The investment rationale for providing such an aggressive recommendation pertains to the company’s ability to ‘execute’ at scale. The Brokerage is also bullish on multiple initiatives of the company in the past couple of days aiming at improving customer experience and exploring adjacencies in its core ‘food delivery’ business.
Written by Amit Madnani
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