Shares of food delivery firm Zomato continued to crash for the second consecutive day on Tuesday to hit an all-time low of ₹42 on the domestic bourses.

The scrip has tanked 26% in the last two trading sessions after the one-year lock-in period for pre-IPO investors ended. The company's market capitalisation has fallen to around ₹32,793 crore – a 67% drop compared to its market capitalisation of ₹1 lakh crore at the time of listing last year.

On a year-to-date basis, the food ordering company's share price has plunged over 70%.

This comes even as foreign brokerage Jefferies has retained its "buy" rating on the stock with a target price of ₹100 – suggesting a potential upside of 138% from its current levels.

Zomato management has accelerated its journey towards better unit economics and is now eyeing a break-even in the food delivery business in the foreseeable future, Jefferies says in a report.

"Blinkit acquisition elongates the path to profitability and despite management guidance on a break-even in food delivery, investors are not giving much benefit of the doubt. We think this makes for a great case for LT (long-term) investors to buy," the foreign brokerage adds.

The food ordering giant is shelling out as much as ₹4,447 crore to acquire Blinkit (formerly Grofers) in an all-stock deal. On the day the deal was announced, the stock went into a free fall as the cash guzzling quick commerce model has high delivery costs and poor unit economics.

"From an exuberance at the time of listing last year, Zomato is now unloved, having underperformed peers YTD (year-to-date)," the brokerage says, adding that the worries of Fed tightening and investor focus on cash flow have been weighing on the internet names, including food tech, globally.

The stock of the food delivery platform has had a rollercoaster ride ever since it got listed on stock exchanges last year. Shares of Zomato listed at a 51% premium over the issue price of ₹76 on BSE. The food ordering app's share price touched an all-time high of ₹169.10 on November 16, 2021.

Zomato's adjusted EBITDA loss for the January-March quarter was less than $30 million, with food delivery losses at $10 million. Jefferies expects this to get better quarter after quarter as the company management lowers its customer acquisition cost by tapping into its monthly active users to drive monthly transacting users, reduces discounts, increases take-rates among others.

Rival Swiggy is also expected to focus on profitability, according to Jefferies. "We expect tight liquidity conditions to also push Swiggy to focus on profitability as it also builds businesses beyond the core (particularly its quick commerce offering under Swiggy Instamart)," the brokerage says in its note.

The Gurgaon-based food aggregator won't be investing across multiple businesses like before, says the brokerage. "Unlike past where Zomato intended to invest across multiple businesses, with some strategic (eyeing an eventual merger) and others as financial investment, the company now intends to conserve cash. The company does not plan to commit any resources for existing or now minority investments," Jefferies says.

Jefferies on Zomato

Zomato cracks 12% to all-time low, Jefferies says 'great case' to buy