Pair trade: Brokerage Citi overweight on Zomato, underweight on Info Edge

Foreign brokerage Citi has initiated a pair trading by going underweight on Info Edge and overweight on Zomato. In a note, Citi said it expects Zomato to outperform Info Edge in coming quarters. It noted that shares of Zomato have fallen 60 per cent this year against a 20 per cent drop in shares of Info Edge.

"For Zomato, we think many risk factors are factored in," Citi said. Besides, the brokerage said Zomato's valuations are more reasonable when compared with global peers.

Info Edge, on the other hand, faces a few risks, Citi added.



Recently, UBS initiated coverage on Zomato with a ‘buy’ rating and a target price of Rs 165. The foreign brokerage said it sees a long runway for growth in the Indian food delivery space, estimating that Zomato will deliver an over 40 per cent compounded growth in revenue. This could make Zomato one of the fastest-growing internet companies in the region, UBS said. Zomato's valuation is not cheap versus peers but the growth outlook is super, UBS said.

Citi's recommendation came at a time when US hedge fund Tiger Global reduced its shareholding in Zomato by selling 2.34 per cent stake or 18.44 crore shares in a series of bulk deals between July 25 and August 2. The sale was done in a series of open market deals after the mandatory one-year lock-in period for pre-IPO investors ended last week.

Also, Uber Technologies on Wednesday sold its entire 7.78 per cent stake in Zomato in a bulk deal on the BSE in which two institutional investors - Fidelity and ICICI Prudential Life Insurance - bought stakes in the new-age stock.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)