Nomura sees 19% downside in Zomato; pay hikes galore in logistics, delivery


A month ago, global brokerage firm Jefferies said it saw a huge 130% upside in Zomato shares, which were trading around Rs 43 at the time, having recently plunged more than 20%. Now, another brokerage firm has said the stock is overvalued at the current price of Rs 62.

Also in this letter:
■ Pay hikes, bonuses galore as demand for workers shoots up
■ Asian hedge funds back Alibaba, Sea after stock beating
■ Pegasus maker NSO Group’s CEO steps down


Nomura initiates coverage on Zomato with ‘reduced’ rating

zomato

Foreign brokerage Nomura has initiated coverage on Zomato with a ‘reduce’ rating and a target of Rs 50, which suggests a potential 18.56% downside from Friday’s closing price of Rs 61.40.

Why? Nomura India said double-digit contribution margin in food delivery is a tough task and that it expects Zomato’s food delivery business to become profitable at the adjusted Ebitda level by Q1FY24, excluding Blinkit.

This, it said, would be led by disciplined execution in a duopoly market.

By the numbers: Overall, the brokerage expects contribution margin to peak at 7.5%.

It sees a 4.5% adjusted Ebitda margin on gross order volumes (GOV) by FY31, against global food delivery companies’ long-term targets of 4-8% in markets where online food delivery is more mature and customers are more willing to pay for convenience.

It further expects food delivery revenue growth to moderate by FY27.

Earlier this month, Zomato announced its food delivery business had broken even and said it plans overall breakeven by March 2023.

Mixed signals: Late last month, global brokerage firm Jefferies said it saw a 130% upside in Zomato shares, which were trading around Rs 43 at the time.

It cited hopes of strong growth momentum in average monthly transacting users (MTUs) and gross order value (GOV) for the food delivery firm over the medium to long-term.

The endorsement came just after Zomato’s stock had plunged more than 23% in two days, following the expiry of the one-year lock-in period for promoters, employees and other pre-IPO investors.

Memberships halted: Meanwhile, Zomato has halted new memberships on its loyalty programmes Pro and Pro Plus as it looks to revamp these offerings for customers and merchants, a company spokesperson confirmed to us. Zomato launched its loyalty programme Zomato Pro in 2020, and Zomato Pro Plus in August 2021.


Pay hikes, bonuses galore as demand for workers shoots up

Ecommerce delivery

Talent demand for doorstep delivery and related functions in the broader logistics and web commerce chain is fast outpacing supply amid a robust economic recovery, experts at recruitment services and staffing firms told us.

This could potentially raise pay packets and festive-season benefits for staff engaged in these roles at industries such as logistics, ecommerce and warehousing, they said.

Who’s doing what: Flipkart plans to offer festival bonuses to its supply chain workforce this year, a spokesperson told us.

Ecom Express also plans attractive incentive schemes to draw talent and drive retention while boosting productivity, its chief strategy officer Ashish Sikka said.

Many ecommerce and logistics employees have reported a 25-30% on-year increase in compensation through bonuses and incentives, said Yeshab Giri, chief commercial officer, Staffing & Randstad Technologies, Randstad India.

In the upcoming festive season, logistics and last-mile delivery companies are bracing for higher demand not only from big cities but also tier 2, 3 and 4 markets as web commerce grows beyond metros.

Jobs aplenty: The estimated demand for last-mile delivery, logistics, supply chain, customer service and warehouse talent this year is 35% more than last year, executives at staffing and logistics firms including Ecom Express told us.

About three to four lakh workers are likely to be hired between August and November, Randstad said, largely driven by ecommerce majors and logistics companies.


Asian hedge funds back Alibaba, Sea after stock beating

Alibaba

Alibaba and Sea have become preferred choices for Asian hedge funds, which have doubled their positions in the two tech giants in the second quarter, after their stocks took a yearlong beating, Bloomberg reported.

While the number of Alibaba shares held by the Asia-focused funds increased 311% during the period, that of Sea jumped by 110%. Alibaba’s US shares have slumped 72% since October 2020 and Sea is down 82% from October 2021 highs.

Why now? A growing number of Chinese technology firms are now also listed in Asia, and the switch from US-listed to Asia-traded shares may explain some of the position changes.

The analysis is based on the 13F filings of 15 Asian asset managers – including hedge funds Aspex Management and Oasis Management Co. – that had at least $200 million in quarter-end holdings.

Yes, but: US-listed Asian companies tend to concentrate on the technology and healthcare industries, meaning the 13F filings may give a biased picture of the funds’ industry exposure. The filings also don’t reveal short-selling activities or the timing of the trades.

TWEET OF THE DAY


Pegasus maker NSO Group’s CEO Shalev Hulio steps down

NSO Group

Shalev Hulio, the chief executive officer of spyware firm NSO that makes Pegasus, has stepped down with immediate effect. Chief operating officer Yaron Shohat will oversee the operations till a successor is named.

Around 100 employees will also be sacked in what the spyware maker termed a “reorganisation”.

Under the radar: The Israeli firm has been under the spotlight ever since The Pegasus Project – an investigation by an international media consortium – revealed that more than 50,000 phone numbers were targeted by its spyware, which it sells only to governments.

On the list were 300 verified phone numbers in India, including those of ministers, opposition leaders, a sitting judge, more than 40 journalists, and several activists and business persons.

Also read: ETtech Explainer: What is Pegasus spyware and how it works


Australian govt begins crypto stocktake ahead of regulations

Cryptocurrency

The Australian government on Monday said it would do a virtual stocktake of the country’s cryptocurrency holdings, the first signal from the new centre-left government that it plans to regulate the $1 trillion sector.

According to the government, Australia would be the first country in the world to conduct such an exercise.

What this involves: Treasurer Jim Chalmers said his department would undertake “token mapping”, or cataloguing of the types and uses of digital currency owned within the country, as a first step to identifying which cryptocurrency assets to regulate.

Background: Australia has wrestled for years with the question of how to regulate crypto. Last year, a Senate inquiry under the previous conservative government recommended wide-ranging regulations to protect cryptocurrency owners, but that administration lost an election this May before any new laws were put in place.

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Gaurab Dasgupta in New Delhi. Graphics and illustrations by Rahul Awasthi.





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