ICICI Securities has maintained an optimistic view on Zomato, setting a target price of Rs 425. The brokerage cited the company's goal to open 5,000 quick commerce stores by FY28 as a key growth driver. While the firm's food delivery business remains strong, investors are watching how aggressive expansion affects profitability in a competitive market.
ICICI Securities has maintained an optimistic outlook on Zomato, keeping a target price of Rs 425. This update follows the company's strategy to significantly expand its quick commerce footprint under the Blinkit brand. The company aims to reach approximately 5,000 store locations by the 2028 financial year, a target that signals the firm's belief in the future of on-demand rapid delivery models.
Management has focused its expansion strategy on smaller cities, where initial data suggests that stores can reach profitability faster than in larger metros. By increasing the variety of products available on the platform, Zomato is aiming to grow its advertising revenue, which could help offset the costs associated with opening thousands of new dark stores. The company expects this mix of growth to support its expansion without causing a major dip in overall profit margins.
The food delivery business also showed accelerated performance during the second quarter of the 2027 financial year. Zomato is currently using the cash generated from its core food delivery operations to fund the expansion of its quick commerce division. To support this efficient capital deployment, the company has also been focusing on its 'Dark.AI' initiative, which is designed to optimize supply chain and inventory management.
Despite this momentum, investors should note the high level of competition in the Indian quick commerce sector. Zomato operates against well-funded rivals such as Swiggy Instamart, Zepto, and BigBasket. The quick commerce model is sensitive to operational costs, and the company's success will depend on its ability to manage these costs effectively while scaling up. Any unexpected rise in delivery partner expenses or operational hurdles at the store level could put pressure on the firm's financial health.
The most important factors for investors to track in the coming quarters will be the pace of new store additions, the impact of festive season demand on order volumes, and whether the company can sustain its profit margins while spending heavily on infrastructure. The market will also look for evidence that the company's reinvestment of food delivery profits is yielding the expected long-term returns in the quick commerce segment.