Zomato joins Sensex, signals shift in India’s business landscape

Zomato made history today becoming the first new-age technology stock to join the BSE Sensex, replacing JSW Steel in a routine half-yearly rebalancing of constituents. This marks a significant milestone in India’s evolving business landscape.Although the rebalancing is a regular occurrence, Zomato’s inclusion highlights the rising importance of the consumer internet sector. The BSE ensures the Sensex remains focused on the market’s most prominent and liquid stocks, selected based on market capitalisation, trading frequency, and financial performance.

As of Monday 11.15pm, the company’s stock was trading at Rs 280.30, down 0.5%. Its market capitalisation was over Rs 2.7 lakh crore.

Financial turnaround

Zomato’s inclusion in the 30-stock benchmark index is driven by a remarkable rally in its stock. Shares of the Deepinder Goyal-led company have surged 45% over the past six months and 133% in 2024, compared to a 10% gain for the Sensex.Meanwhile JSW Steel’s stock gained only 1.1% in the last six months and 5% year-to-date. Zomato’s financial turnaround has been the key driver of its stock performance.

It became profitable in the first quarter of FY24, and has posted a net profit in every quarter since then. In the July-September period, consolidated revenue from operations jumped 68% to Rs 4,799 crore, and net profit increased fivefold year-on-year to Rs 176 crore. This growth was supported by consistent improvement in food delivery margins and near-break-even performance in quick commerce operations.

Also Read:Zomato’s QIP salvo before Swiggy IPO will further fuel quick commerce frenzy

Significant fund flows

Brokerage firm Nuvama projects significant fund flows as institutional investors adjust portfolios to align with the updated index composition. Zomato is expected to attract $513 million in inflows, reflecting heightened investor interest in the tech-driven business. Meanwhile, JSW Steel, which will exit the index, is likely to witness $252 million in outflows.

Further bolstering its financial position, Zomato raised Rs 8,500 crore through a qualified institutional placement (QIP) largely led by domestic investors, the company announced on November 29.

Its quick commerce firm Blinkit is locked in a high intensity battle with the likes of listed peer Swiggy, Lightspeed-backed Zepto, Tata group’s Big Basket and Walmart-owned Flipkart. Analysts have suggested that a majority of Zomato’s valuation now is on account of Blinkit, as per sum of the parts (SOTP) analysis.