According to Zomato’s current market cap, the company is valued at just over $8.1 billion, which seems expensive.

The price of Zomato’s share rose 4.4% on Thursday, reaching an intraday high of Rs 79.35 a share as the scrip recovered after closing below the IPO price of Rs 76 a share yesterday. The online food delivery giant is said to be in talks to acquire 10-minute delivery platform Blinkit (formerly known as Grofers) in a share swap deal. The Blinkit acquisition could pave the way for Zomato to enter the e-grocery market, which is becoming more competitive by the day. However, analysts advise investors to stay away from Zomato stocks for now, citing several headwinds and predicting more cash burn.

Not in the mood for Zomato broth

According to Zomato’s current market cap, the company is valued at just over $8.1 billion, which looks expensive, Amit Jain, Chief Strategist – Global Asset Class, Ashika Group told “As of now, Zomato’s market cap is close to $8 billion, which looks expensive as it will burn more cash with the Blinkit acquisition and it will put further pressure on Zomato’s balance sheet, hence medium-term investors may have to wait for more price and time correction,” he added.

While Zomato has a market cap of $8 billion, its online food delivery rival Swiggy recently raised funds at $10.7 billion post-money valuations. Divam Sharma, founder of Green Portfolio – a SEBI Registered Portfolio Management Service, advised to avoid the stock from now on. “For retail investors, we recommend avoiding stocks for now and waiting for the growth and synergies of investments and the Blinkit acquisition,” he said, adding that he would like to see growth in its core business, which is food. delivery.

Will Blinkit Acquisition Help?

Blinkit struggles to raise funds and has even closed warehouses to support itself. Earlier this week, Zomato had announced a $150 million investment in Blinkit in the form of debt. Zomato’s entry into the grocery delivery business seemed inevitable, as his rival had already jumped on it. “Zomato has a large food delivery network, which can be used for grocery delivery, and both products are complementary to each other,” added Amit Jain. However, he said the move will remain essentially weak until the synergies of both companies begin to add to the merged entity’s profits. “This potential product line synergy can help the merged entity create long-term value for all stakeholders,” he said.

Other players in the space, such as Zepto, Dunzo and Instamar, are already raising money and preparing a war chest, according to Divam Sharma. “This merger ensures high growth for Zomato in the coming quarters. It will also make it easy for Zomato to increase its investments in Blinkit,” he added.

This post Zomato share price is rising, but analysts advise against buying shares

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