Zomato's acquisition of Shiprocket unlikely, could impact share performance: Jefferies

Jefferies, a brokerage firm, has expressed skepticism about the likelihood of Zomato acquiring the B2B logistics start-up Shiprocket. Despite media reports suggesting Zomato's offer for Shiprocket, Jefferies sees the deal as "unlikely" at this stage. The brokerage maintains a buy call on Zomato's stock and projects a 32 percent upside to its price.

According to a report, Zomato is said to have made an acquisition offer for Shiprocket, with a potential target valuation of $2 billion. However, Jefferies analysts Vivek Maheshwari, Jithin John, and Kunal Shah believe there is a low probability of the deal materializing. They point out that Zomato already owns a 5 percent stake in Shiprocket following a 2021 investment.

The analysts highlight that Zomato's management is currently focused on the ramp-up phase of its quick commerce business, and balancing growth and margin remains a key focus in the food delivery segment. They suggest that if the acquisition were to happen, Zomato's shares might trade weak due to the perceived unrelated nature of the acquisition, despite potential linkages with quick commerce and hyperpure.

Shiprocket, the target of the supposed acquisition, is a B2B logistics-tech start-up providing shipping and fulfillment services to direct-to-consumer (D2C) brands and omnichannel sellers. Jefferies emphasizes that Zomato's management, with a mindset of growth and new lines of business, has been acquisitive in the past. However, they believe that given the current priorities, diversification appears unlikely.

Zomato's focus on its existing businesses, its ongoing ventures in quick commerce, and the need for management bandwidth make the acquisition of Shiprocket less plausible in Jefferies' view.