Zomato’s share price decreased by 10.5% just after releasing reports for the third quarter of fiscal year 2024-2025. This sharp downfall has happened because of some reasons, which are very important to know for investors in Zomato before taking any action.
Revenue of Zomato for this year has crossed the mark of Rs 5,000 crores, increased by around 64% on a year-on-year basis to Rs 5,404 crore; this shows the speed of expansion of Zomato without being into high losses in comparison to its competitors.
Zomato’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) are at ₹162 crores, compared to Rs 51 crore from last year, and also its margins have expanded, which is actually good. Also, the revenue of Blinkit (Zomato’s quick commerce company) has increased by 117% compared to the last year.
Let’s go through some important facts and understand why Zomato’s share price decreased.
Why Zomato’s Share Price Decreased
Zomato’s share price decreased because of the reported decrease in the net profit of Zomato in its 3rd quarter of 2024-2025. Zomato’s net profit decreased by a staggering 57.25%. The company’s net profit in Q3 FY25 has declined to Rs 59 crore in comparison to Rs 138 crore in the same period just a year ago in Q3 FY24.
Zomato’s share price decreased by 9.42% and is trading at Rs 218.25. The share price of Zomato has decreased in previous sessions too. The report of a decrease in the net profit has made small investors sell their holdings, which became the core reason why Zomato’s share price decreased.
On the basis of this news, mostly small retail investors in Zomato have sold their shares, which resulted in a sudden downfall in the share price of food delivery giant Zomato.
Why Zomato’s Net Profit Decreased
But let’s know the important thing: How has the net profit of Zomato decreased and brought a sharp downfall in its share price?
There are a few major reasons why Zomato’s share price decreased.
The first reason is that Zomato’s total expenses have increased a lot in the fiscal year 2024-2025 in comparison to the fiscal year 2023-2024. Total expenses of Zomato surged to Rs 5,533 crore compared to ₹ 3,383 in the past fiscal year’s period.
The second major reason is Zomato’s quick commerce business Blinkit’s expansion in total number of stores, as Blinkit has already added 216 stores in 2024 and surpassed 1000 total Blinkit stores in India. Also, Zomato is targeting to open 2000 total stores in India by the end of 2025.
So the expansion of companies parented by Zomato will actually affect the profitability of Zomato in the short term, but it will give much better results in the long term. Blinkit faces competition from big rivals like Walmart-backed Flipkart, Swiggi’s Instamart, Zepto, and Tata Group-backed BigBasket. But still, Blinkit is the market leader in India.
The third reason is that Blinkit is still loss-making. As of Fiscal Year 2024-2025, Blinkit is still at a loss of Rs 103 crore, which is being covered by Zomato.
What Investors Should Do?
Even after there has been a sharp decline in the share price of Zomato, most of the brokerages remain positive and optimistic about the future performance of Zomato. For example, the brokerage firm CLSA has stated a target price of Rs 400 for Zomato stock.
Nuvama Institutional Equities has mentioned that Blinkit’s dark store additions are outpacing expectations, leading to faster growth.
“We believe this bunching up of costs for dark store addition shall hurt profitability in the short term but shall ultimately lead to bunching up of profitability in future quarters as these stores mature,” Nuvama said.
Nuvama has cut its target price a bit on the stock to Rs 300, but what’s positive is it has retained its ‘BUY’ call for Zomato stock.
Brokerage firm Jefferies remains optimistic and shows confidence in Zomato’s management’s goal to double the total number of Blinkit stores to 2,000 by the end of 2025. But despite showing its confidence in management, Jefferies has cut its target price to Rs 255 and given a ‘Hold’ rating for Zomato stock.
Brokerage Firm Nomura has stated that Zomato is facing a high level of competition in the quick commerce market, but Blinkit will secure a top-two spot in this immensely popular and competitive market.
Bernstein, the brokerage firm, stated that the current correction in the stock of Zomato is due to the immensely rising competition in the quick commerce market and also retained an ‘OUTPERFORM’ rating for the stock of Zomato with their target price of Rs 310.
Conclusion
Zomato’s share price decreased because of a big drop in its net profit disclosed in its third-quarter results., and also because of the losses made in its quick commerce company Blinkit, also because the demand for food delivery has slowed down on Zomato’s food delivery app, and because of Zomato’s high expenses in the recent past. Though Zomato is investing in the future and these investments will benefit Zomato in the future, until then, its stock prices will keep fluctuating as there will be pressure on Zomato’s stock.