Shares of food delivery company Zomato hit a new low on Thursday continuing its downward trend since listing. The stock fell as much as 2.8 percent to its record low of ₹73.75 on BSE.
Just in the last 2 sessions, the stock has lost over 7 percent. Just in 2022 year-to-date, the stock has declined 46 percent.
The recent for the recent decline could also be the decline in its equity in FII and mutual funds. Foreign investors and mutual funds have reduced their stake in the firm in the January-March quarter (Q4FY22).
Individually, MFs' stake in the firm in the March quarter has cut to 2.82 percent from 3.88 percent in the December quarter. However, individual shareholders' holding in Zomato increased to 9.07 percent from 7.06 percent in Q3FY22.
Earlier this month, the Competition Commission (CCI) has ordered a detailed investigation against food delivery platforms, Zomato and Swiggy, for alleged unfair business practices with respect to their dealings with restaurant partners.
As per reports, Zomato clarified that the company will continue to work closely with the Commission to assist them with their investigation and explain to the regulator that their practices are in compliance with the competition laws. "We intend to promptly comply with any recommendations given to us by the Commission," Zomato said in an exchange filing.
The allegations refer to Competition Act provisions that disallow agreements that cause an appreciable adverse effect on market competition. The CCI has asked its director-general of investigation to complete the probe in 60 days.
Global brokerage and research firm HSBC recently maintained their ‘Hold’ rating on the stocks with a target price of ₹92, indicating an upside of around 25 percent from the current lows.
“Concerns around sky-high growth expectations and punchy valuations have moderated, while average order values have held up better than our expectations,” HSBC said in the report. Valuations of Zomato were a concern earlier but HSBC believes a 50 percent fall in share price since November last year makes valuations less demanding.
"Also, we believe that, unlike many other segments in the new-tech space, the food delivery industry is relatively mature with a healthy duopoly structure and clear value proposition. This should limit a further de-rating in Zomato,” they added.
The brokerage firm said it has a ‘Hold’ rating on the stock as it sees little upside potential to the Street’s gross order value estimates, especially when viewed in the context of overall discretionary consumer spending in the country.
An average of 19 analysts polled by MintGenie have a ‘buy’ call on the stock.