Last Updated on January 21, 2025 by IPO Manthan Team
Zomato’s share price has taken a sharp hit following the announcement of its Q3 FY25 financial results. This steep decline reinforces the headline Zomato share price falls rapidly, reflecting the growing apprehension in the market. Here’s what happened. Investors are expressing serious concerns over the company’s sharp decline in profitability and soaring expenses, resulting in a significant drop in its stock value.
Zomato Share Price Falls Rapidly After Weak Financial Performance
As of January 21, 2025, Zomato’s stock plunged by 10.44%, trading at ₹215.80 on the Bombay Stock Exchange (BSE). The intraday low touched ₹210.15, marking a steep decline compared to the previous trading session. This drastic fall in the stock price has raised concerns among investors and analysts alike.
Key Reasons Behind Zomato Share Price Decline
- Net Profit Decline: Zomato’s net profit dropped by 57.24% year-over-year, settling at ₹59 crore compared to ₹138 crore in the same quarter last year. Despite a revenue surge of 64.38% to ₹5,405 crore, soaring expenses—which rose by 63.55%—have severely impacted profitability. This is one of the primary reasons why Zomato share price falls rapidly in the market.
- Aggressive Expansion Costs: Zomato’s heavy investments in its quick commerce segment, Blinkit, have put pressure on margins. The company’s operational costs have ballooned due to the rapid establishment of new fulfillment centers, adding to its financial strain.
- Slow Growth in Food Delivery: Zomato’s core food delivery business has seen a slowdown, with only a 2% sequential growth in Gross Order Value (GOV). This reduced growth momentum started in late November and has added to investor concerns.
- Rising Employee Costs: The company’s employee expenses have increased due to higher costs related to stock options and cash benefits. This is largely due to competition for talent in the quick commerce sector. These mounting expenses further explain why Zomato share price falls rapidly after disappointing results.
Broader Market Impact
The fall in Zomato’s stock price occurred on a day when the broader Indian stock market was also under pressure. The BSE Sensex dropped by over 778 points (1.01%), which amplified the negative sentiment around Zomato’s performance.
Analyst Downgrades Add to Concerns
Several analysts have revised their target prices downward following Zomato’s Q3 results. Notably, Macquarie has set a target price of ₹130, signaling a potential downside for the stock. Analysts cite competitive pressures, profitability challenges, and high operational costs as key reasons for their cautious outlook. This downgrade has further fueled concerns as Zomato share price falls rapidly in the trading environment.
Conclusion
The drop in Zomato’s stock price has dominated headlines after the company’s disappointing Q3 FY25 results. While Zomato has shown strong revenue growth, the rising expenses and declining net profit have overshadowed its achievements. Investors are closely watching how the company addresses its cost challenges and whether its aggressive expansion strategy for Blinkit will yield long-term gains.
The significant decrease in Zomato’s stock value highlights the importance of balancing expansion with profitability. Until Zomato demonstrates better control over its expenses and improved growth in its core business, the notion that Zomato share price falls rapidly will remain relevant to market participants.