Zomato reportedly made an approach to acquire B2B logistics start-up Shiprocket, but Jefferies believes the deal is “unlikely.”
The firm forecasts a 32% price upside and has a buy call on the stock. According to a report by Bloomberg, Zomato has made an offer to buy Bigfoot Retail Solutions, an Indian e-commerce logistics start-up better known for its Shiprocket brand. There are estimates that suggest the desired valuation might be $2 billion.
Analysts from Jefferies, Vivek Maheshwari, Jithin John, and Kunal Shah, stated in a report on the company dated December 21, that they “ascribe a low probability of a deal at this stage” because the management is preoccupied with managing its fast-growing business, which is still in the ramp-up phase, and with balancing growth and margin as a “key focus in food delivery.”
As the analysts pointed out, following its investment in 2021, Zomato already holds 5% of Shiprocket. They claim that if the deal goes through, Zomato’s stock may trade “weak” since, despite possible connections between rapid commerce and hyperpure, this transaction initially appears unrelated.
A B2B logistics-tech start-up, Shiprocket offers shipping and fulfillment services to omnichannel merchants and direct-to-consumer (D2C) companies in a variety of categories, including groceries, electronics, clothing, and cosmetics and personal care. It offers services for every stage of a customer’s online experience, including discovery, order management, warehouse & fulfillment, shipping, order tracking, and refunds. It uses an asset-light business strategy.
According to the analysts’ analysis, Zomato has historically made a few investments that were less significant and has been acquisitive, particularly in 2021. Although its current operations probably don’t need a large investment, the corporation has US$1.4 billion on its books. Organic or not, new business ventures are not out of the question for management with a growth mindset. We believe management’s hands are full, too, because food delivery is still increasing in profitability and Q/C requires bandwidth from the management. As a result, we currently find diversification to be highly unlikely.”
