Zomato Stock Hits Record High As Karnataka Proposes Gig Worker Welfare Bill
Morgan Stanley maintains its 'overweight' rating on the stock, cautioning investors due to potential increased delivery costs due to the proposed bill.
Shares of Zomato Ltd. hit a record high on Tuesday after the Karnataka State Government released a draft bill mulling a welfare board and fund for gig workers.
The Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2024, will establish a welfare board and fund for gig workers, mandate aggregators to prevent unjust dismissal, and propose a fee on transaction costs or annual turnover for aggregators, if implemented.
A gig worker is a person who works temporary jobs, typically in the service sector, as an independent contractor or freelancer.
Following this, research firm Morgan Stanley reiterated it's 'Overweight' rating on the stock, even as the brokerage warns investors to be cautious since it foresees an increase in delivery costs due to the proposed bill.
The target price remains unchanged at Rs 235 apiece, implying an upside of 15.17% from the previous close.
The brokerage cautioned that implementing such laws nationwide would create a more complicated operating environment for platform-based companies. The bigger medium-term implication would be increased regulatory, it said.
"Over a period of time, we believe the incremental cost burden could be shared by all the stakeholders (end customers, restaurants, and platform companies), the research firm said in a note.
"We believe the bigger medium-term implication would be increased regulatory scrutiny and a more complicated operating environment for platform-based companies," the note said.
Shares of Zomato rose as much as 2.71% during the day to Rs 209.50 apiece on the NSE. It was trading 2.49% higher at Rs 208.99 apiece, compared to a 0.02% decline in the benchmark NSE Nifty 50 as of 10:43 a.m.
The stock has risen 175.18% in the last 12 months and 69.04% on a year-to-date basis. The total traded volume so far in the day stood at 2.0 times its 30-day average. The relative strength index was at 67.83.
Twenty four out of the 28 analysts tracking Zomato have a 'buy' rating on the stock, one recommends a 'hold' and three suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 6.2%.
