Zomato’s shares were back in the black after four sessions of losses as brokerages were upbeat on the company’s fundraising plans.

What Happened: Zomato on Thursday said its board will meet on October 22, Tuesday to consider and approve raising funds through a qualified institutional placement (QIP). The company will also approve its financial results on Tuesday.

This will be Zomato’s first fundraising since it went public in 2021.

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Brokerage Views: Jefferies maintained a "buy" call on Zomato with a target price of ₹335. The unexpected placement comes at a time when the company has $1.2 billion (₹10,086 crore) in cash on its books and its free cash flow is on the rise in the food delivery business, the research firm said.

The brokerage noted that media reports indicate the fundraise will likely be worth $1 billion (₹8,405 crore) with Zomato also applying to the Reserve Bank of India to cap foreign institutional investor holding to 49%. 

The research firm says if this move is confirmed, Zomato will become a domestic firm. This will enable the company to enable a first-party inventory model, which will likely improve its profitability, the brokerage added. This move might also result in stock deletion from MSCI, the research firm notes. 

Bank of America (BofA) maintained a "buy" call with a target price of ₹325. The research firm sees the quick commerce industry going through a phase of increased competition in the next six to 12 months. It believes that the company is focusing on domestic ownership of over 50%.

Price Action: Shares of Zomato gained 3.34% to ₹266.05 on Monday morning.

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