Is Zomato a suitable investment choice for young investors? Zomato, India’s most popular food delivery business, attracts Generation Z investors. It has become a robust food delivery business, and it aims to assist people in discovering restaurants. Here, we will examine why Gen Z investors invest in Zomato and whether it is worthwhile.

Zomato Company Overview

Originally known by the name Foodiebay, Zomato was founded in 2008 by Deepinder Goyal and Pankaj Chaddah in India. From its humble start as an online restaurant directory, it transformed into an integrated platform for food discovery and delivery, serving globally.

Zomato provides a wide range of services to meet the various demands of foodies, such as restaurant searches, reviews, reservation requests, and online meal ordering.

To further establish its position as a leader in the food tech sector, Zomato launched its flagship product, Zomato Gold, in 2014. Gold is a subscription-based dining club that provides special discounts and benefits at partner restaurants.

Zomato Financial Performance

Zomato announced a ₹253 crore net profit for the first quarter of FY2025, a considerable rise over the ₹2 crore net profit for the same period the previous year. Operating revenue was ₹4,206 crore, a 74% increase over the previous year. During the quarter, the company’s Gross Order Value (GOV) rose by 53% to ₹15,455 crore.

Key Financial Metrics of Zomato

Gross margin TTM: 62.51%

Net Profit margin TTM: 2.9%

Current Ratio MRQ: 2.62

Quick Ratio MRQ: 2.46

Total Debt to Equity MRQ: 3.67%

Zomato Stock Performance

July 14–16, 2021, Zomato initial public offering (IPO) was a significant development for the Indian stock market. Priced between ₹72–₹76 per share, it attracted demand of ₹2.13 lakh crore and was 40.38 times oversubscribed. 

As a result, it became India’s third-most oversubscribed IPO. Zomato strengthened its position in India’s expanding food services sector, which is estimated to increase from ₹4.8 lakh crore to ₹8 lakh crore by 2025, when its shares floated on July 23, 2021, at ₹115, a 51% premium.

At present Zomato share price is around ₹260.

Zomato’s market capitalization as of August 2024 is around ₹234,435 crore. Analysts anticipate prices to be between ₹260 and ₹300, with rapid commerce and robust development in meal delivery driving this range.

Should GenZ Invest in Zomato?

Let’s see if Zomato is a suitable investment for GenZ.

Risks and Challenges

●        High Valuation

As of August 2024, Zomato’s price-to-book ratio was 11.7 and its price-to-earnings ratio was 383, indicating a high valuation for the company’s shares. Due to this, the stock is more susceptible to any unfavourable growth fluctuations, which might cause a significant drop in the share price.

●        Intense competition

In India, there is fierce competition among the food delivery companies as Swiggy and other companies compete for market dominance. To keep its competitive advantage, Zomato must constantly develop and enhance its offers.

Growth Prospects

●        Shift to Profitability

In the June FY2025 quarter, Zm revealed its first-ever quarterly profit growth, with net profit increasing by 44% and 126.5 times year over year. This move towards profitability reflects the company’s potential for future expansion.

●        Expanding Market Reach

Zm has been broadening the scope of its services and geographic coverage to reach a wider audience. It is anticipated that this rise will continue in the upcoming years, boosting profits and revenue.

●        Positive Investor Sentiment

Positive sentiment among investors has been seen in Zomato’s stock price, which has increased 2.5 times in a single year and more than doubled in 2024.

This makes an attractive investment option but requires careful consideration of risk appetite and long-term financial goals.

Conclusion

Zomato is changing how consumers find, order, and enjoy food all around the world with its creative strategy and dedication to client pleasure. By attracting Gen Z investors, Stands strong providing outstanding brand quality, technology, and ambitious expansion plans. Despite competition and government regulations, its ability to adapt and embrace new ideas makes it likely to succeed in the future. Investors can use a brokerage calculator to find the cost associated with investing in any other stock.