Zomato’s stock plunges over 11% to hit all-time low

Shares of food delivery platform Zomato plunged 11.37% Monday to an all-time low after the lock-in period for pre-initial public offering (IPO) shares ended. As there are no promoters, pre-IPO shareholders, including promoters, employees, and private equities that together own nearly 78% stake, can sell in the open market without any disclosures after one year of listing.


Zomato shares were listed on 23 July last year.


About 230 million shares were traded on NSE and BSE compared to two weeks' average daily volumes of 45.6 million shares.

Zomato had a blockbuster listing on the Indian stock exchanges last year in July, and its shares more than doubled to hit an all-time high of Rs 169.10 on November 16, 2021. Since then, the stock has declined 72% to close at Rs 47.55 on Monday. Zomato’s market capitalisation stood at Rs 37,439 crores on Monday, compared to Rs 1.26 lakh crores in November last year. The stock's current market cap is below its previous private valuation of $5.5 billion.

The near-term outlook for the stock depends on the category of sellers on Monday, said analysts.

“There are two reasons for the fall in Zomato stocks: first the end of lock-in period for the pre-IPO shareholders and second the rationalization of valuations of new age tech stocks across the globe,” said Gaurav Dua, head – capital market strategy, Sharekhan. “If the sellers on Monday are private equity players or strategic investors, then we expect the stock to go down further; else, the stock should stabilize at the current levels.”

In January, when Zomato’s stock hit the lower circuit on BSE, a message to employees’ founder and CEO Deepinder Goyal told employees that valuations could swing and Zomato had no control over this.

“This is the thing about stock markets and public companies - valuations can swing massively without any change in the fundamentals of the business depending on macro-economic factors like inflation, interest rates, etc.....… we had no control on our valuation going up from $8 billion in the IPO to $17 billion at our peak, and vice versa now,” Goyal had then said.

Zomato shares have declined 28% in the last one month compared to a 1.12% fall in the ET Ecommerce index or a 2% decline in the ET Ecommerce Non-Profitable index. Over a period of three months, Zomato shares plunged 37% compared to a 13% fall by the ET Ecommerce index or 12% by the ET Ecommerce Non-Profitable index.

Last month, Zomato announced the acquisition of Blinkit (formerly Grofers) for Rs 4,447 crore (about $570 million) in an all-stock deal, following which the stock tanked nearly 7%.

The acquisition did not go well with the analysts who said Zomato’s path to profitability would get further delayed due to a cash burn of $165 million a year for Blinkit.

“The transaction would have a three-fold impact on the earnings of Zomato such as increased operating losses to fund Blinkit operations, impact on other income as investments in Capex for Blinkit operations would increase and over 7.4% dilution in equity,” said Rahul Jain, VP-research, Dolat Capital. “We believe that Zomato’s path to profitability would now get further delayed post this integration.”