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Shares of Indian food delivery platform Zomato hit a record high on Friday, as improving profitability paves the way for future growth, triggering a turnaround in investor sentiment.

Zomato is the most-valuable internet stock in Asia's third-largest economy, with a market capitalisation of more than 1.51 trillion rupees ($18 billion). On Friday, its shares rose nearly 5% to 173.5 rupees.

India's several new-age internet companies that hit the markets during the IPO frenzy in 2021 jumped after listing but slumped eventually on investor scepticism over lofty valuations and business models. Several of these firms also fell below their issue prices.

Zomato, which was the first to list among peers like Policybazaar, Paytm, and Nykaa, had a limited track record of profitability, and investors fretted over its strategic moves.

Now, with the company's results trumping expectations for several quarters, sentiment has "completely reversed," Sachin Dixit, internet research analyst at JM Financial, said.

"Investors are incrementally appreciative of whatever Zomato is trying to do and there is a certain amount of consumer love for the business model too."

Zomato's "consistent earnings improvement" and timely delivery on growth targets sets it apart from its peers who have "no clear path to growing profitability", Elara analyst Karan Taurani said.

Nykaa, which was an investor darling, is facing certain macro headwinds for the moment, Dixit noted.

Meanwhile, Paytm, under the regulator's scrutiny, has tanked.

Zomato, with over half the market share in food delivery, will continue to dominate the IPO-bound Swiggy, analysts said.

Blinkit - Zomato's quick commerce business, which it acquired in 2022 - is expected to turn EBITDA-positive next fiscal year and is viewed by investors as the next lever of growth for the firm.

($1 = 82.8580 Indian rupees)