Jefferies maintains ‘Buy’ on Zomato, sees 32% upside amid speculations on Shiprocket deal

Jefferies maintained a buy call for Zomato with target price of Rs 165. The report says that speculations surrounding a potential deal with Shiprocket, although Jefferies expresses skepticism about the likelihood of such an agreement. The company has reportedly denied any ongoing negotiations.

Zomato holds a 5% stake in Shiprocket following an investment made in 2021, and Jefferies attributes a low probability to the possibility of a deal at this stage. The report suggests that the management’s hands are currently full with Quick Commerce initiatives, contributing to the skepticism regarding a potential Shiprocket deal.

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As Zomato remains in a ramp-up phase, Jefferies underscores the importance of striking the right balance between sustained growth and maintaining profit margins, especially in the highly competitive food delivery sector. The report highlights the challenges faced by Zomato in navigating this delicate equilibrium.

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Shiprocket, a B2B logistics technology startup, specializes in delivering shipping and fulfillment services to direct-to-consumer (D2C) brands and omnichannel sellers operating in diverse categories, including apparel, electronics, beauty and personal care, and grocery.

 The platform offers a comprehensive suite of services, encompassing discovery, order management, warehouse and fulfillment solutions, shipping services, order tracking, and efficient returns processing.

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Prior to Zomato’s official clarification, a Jefferies report indicated that the likelihood of the Shiprocket deal materializing is low. Notably, Zomato currently holds a 5 percent stake in Shiprocket, a position acquired through an investment in 2021. 

The report suggests that if the acquisition were to proceed, Zomato’s shares might experience a period of weakness. This is attributed to the perceived lack of direct relevance, despite potential underlying connections between the acquisition and Zomato’s existing ventures in quick commerce and hyperpure.

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