Shares of Zomato dropped by 5% to ₹264.85 on the NSE after global brokerage firm Jefferies raised concerns about rising competition in the quick commerce sector. Even though Zomato’s shares doubled in value in 2024, Jefferies predicts that 2025 could be a slower year for the stock, with prices likely to stabilize.
Because of these challenges, Jefferies has lowered its financial forecasts for Blinkit. The target multiple for Blinkit has been cut to 6x, and its EBITDA (earnings before interest, taxes, depreciation, and amortization) estimates for FY26-27 have been reduced.
Despite these challenges, Zomato’s shares have performed well over the past year, rising 91% in the last 12 months. However, the recent drop in share price shows that investors are worried about Zomato’s ability to grow in a competitive market.
Why Did Zomato Shares Fall?
Jefferies said lead to more discounts, which might hurt Zomato’s profits. Zomato’s quick commerce service, Blinkit, faces tough competition from Swiggy’s Instamart, Zepto, Amazon, and others.Because of these challenges, Jefferies has lowered its financial forecasts for Blinkit. The target multiple for Blinkit has been cut to 6x, and its EBITDA (earnings before interest, taxes, depreciation, and amortization) estimates for FY26-27 have been reduced.
What Does This Mean for Zomato?
Jefferies has also lowered its overall estimates for Zomato. EBITDA projections were lowered by the brokerage by 15% for FY25 and 12% for FY26. Profitability estimates were reduced by 17% for FY26 and 18% for FY27. Additionally, Earnings Per Share (EPS) forecasts were cut by 20% for FY26 and 21% for FY27.Despite these challenges, Zomato’s shares have performed well over the past year, rising 91% in the last 12 months. However, the recent drop in share price shows that investors are worried about Zomato’s ability to grow in a competitive market.
Swiggy Shares Also Drop
Zomato’s rival, Swiggy, also saw its shares fall by 1.77% to ₹522.70. This shows that the entire quick commerce sector is under pressure due to rising competition.Quick Commerce Market Growth in India
Even with the current challenges, the quick commerce sector in India is expected to grow significantly. Reports suggest that the market could reach $5 billion by 2025 and $9.94 billion by 2029. This growth is driven by changing consumer preferences, increased use of e-commerce, and the demand for convenience among millennials and Gen Z.Who Are the Major Players?
The Indian quick commerce market is dominated by a few key players:- Zepto: Leads with nearly 11 million app downloads.
- Swiggy’s Instamart: Recorded 9.8 million app downloads.
- Zomato’s Blinkit: Saw around 6.6 million downloads.
- Tata’s BigBasket (BB Now): Recorded about 3.5 million downloads.
- Dunzo: Had fewer than a million downloads.