Zomato shares rose more than 3% in Friday morning trading after Goldman Sachs upgraded the stock to a 'buy' rating and boosted its target price to Rs 240 from Rs 170, representing a 41 percent increase. 

According to Goldman Sachs' sum-of-the-parts analysis, Indian food delivery company Zomato's rapid commerce unit, Blinkit, is now more valuable than its core food delivery business.

The investment bank calculates Blinkit's implied value at 119 Indian rupees per share ($1.43), or almost $13 billion, while Zomato's food delivery service is valued at Rs 98 per share. Goldman previously estimated Blinkit's worth at $2 billion in March 2023.

Blinkit's valuation increase is being driven by its substantial expansion potential in India's rapidly increasing quick commerce market. Goldman Sachs expects Blinkit's gross order value (GOV) to expand at a compound annual growth rate (CAGR) of 53% between fiscal years 2024 and 2027, outperforming the total online grocery market's estimated CAGR of 38% during the same time.

The investment bank believes India's fast commerce market is positioned for expansion due to several variables, including a huge unorganized grocery sector, high urban population density, and a favorable delivery cost-to-average order value ratio. These characteristics have enabled Blinkit to offer competitive costs and quick delivery times, resulting in increased client uptake.

Blinkit was bought by Zomato in 2022 for roughly $570 million in an all-stock transaction. SoftBank, Tiger Global, and Sequoia Capital India (now Peak XV Partners) all invested in the rapid commerce company.

Analysts and brokerages have anticipated that Zomato's stock price will rise over the next six months due to growth in the fast-growing quick-commerce market. The company's share price has increased by about 80% since the end of October.

According to Goldman Sachs' analysis, Blinkit's gross order value (GOV) and earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to be larger than those of food delivery by fiscal 2029.

Meanwhile, it anticipates Zomato's meal delivery service to grow at a rate of 15-20% each year for the foreseeable future.