Zomato shares in focus as Sensex entry likely to attract USD 513 million inflows

Zomato shares are in focus on Monday as the food delivery giant becomes the first new-age tech company to join the BSE Sensex’s 30-share frontline index, replacing steel giant JSW Steel as part of the benchmark’s planned rejig on December 23. The reshuffle is expected to drive inflows of USD 513 million into Zomato, while JSW Steel may see outflows of USD 252 million, according to estimates by brokerage firm Nuvama.

The planned index rejig comes at a time when Zomato has seen an unfazed rally in the past year. Zomato's stock price has rallied nearly 43 percent in the last six months and about 126% in the past year, outperforming benchmark Sensex, which has given about 10.7 percent returns in the same period. Meanwhile, JSW Steel has given nearly 9 percent returns in one year.

“Over the past 18 months, as Zomato started to demonstrate its ability to gradually improve unit economics and move towards breakeven and beyond (especially in the qcom segment), the stock rallied by almost 150 percent,” brokerage firm UBS said in its latest report.

UBS said that according to its latest estimates, Zomato trades at an “FY27e EV/EBITDA (adjusted) of 39x, implying an FY27e EV/Sales of 6.3x.”

Zomato reported a 69 percent year-on-year increase in consolidated revenue from operations to INR 4,799 crore during the July-September quarter, alongside a five-fold jump in net profit to INR 176 crore. The company’s subscription program, Zomato Gold was successfully relaunched in early 2023 and helped the company increase ordering frequency from its top customers, UBS noted.As of December 21, Zomato’s market capitalisation stood at INR 2.72 lakh crore, surpassing JSW Steel’s INR 2.24 lakh crore.

Meanwhile, the index rebalancing extends beyond the Sensex to the BSE 100 index, which will see six new entrants, including Jio Financial Services, Suzlon Energy, Adani Green Energy, Adani Power, Samvardhana Motherson International, and PB Fintech (Policybazaar). They will replace stocks like Ashok Leyland, P.I.Industries, IDFC First Bank, Indian Railway Catering and Tourism Corporation (IRCTC), UPL and APL Apollo Tubes.

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