Zomato’s Bold Move: 18.2 Cr Shares Worth Rs 3,500 Cr Up for Grabs – Is This the Next Big Thing?

Zomato’s Employee Stock Ownership Plan (ESOP) expenditure nearly doubled to Rs 161 crore in the March quarter, compared to Rs 84 crore in the preceding year’s period. Seeking shareholder endorsement, Zomato proposes a fresh ESOP encompassing 18.2 crore shares, valued at over Rs 3,500 crore at the current market valuation.

Typically, a newly sanctioned ESOP plan is dispensed to employees over a span of several years.

This development transpires amidst the company’s soaring stock performance, having surged by 62 percent to Rs 198 per share over the last six months. This surge owes to enhanced profitability in its core operations and the rapid expansion of its expedited commerce wing, Blinkit.

The issue of elevated ESOP expenses has persisted as a challenging concern for contemporary firms such as Zomato and Paytm in recent years.

Zomato’s ESOP expenditure nearly doubled to Rs 161 crore in the March quarter, contrasting with Rs 84 crore in the corresponding period of the previous year. The company’s stock is trading at more than 100 times the projected earnings, surpassing valuations of global counterparts including Uber, Deliveroo, and Meituan.

Goldman Sachs Group Inc. anticipates a surge in profit forecasts for Zomato’s “quick commerce” venture, Blinkit, as stated by analyst Manish Adukia in a recent report. While previous investor deliberations evinced doubts regarding the profitability of this business model, Adukia suggests that these reservations may wane with the disclosure of more financial outcomes.

The generous valuations bestowed upon Zomato appear warranted, given the “substantially higher” anticipated revenues and profits for the company, asserts ICICI Securities Ltd. analyst Abhisek Banerjee. Banerjee further notes that the stock has largely mirrored the trajectory of Doordash Inc. over the preceding six months, amidst an ameliorating sentiment towards technology stocks globally.

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