Shares of Zomato suffered a massive loss of about 14% to hit their all-time low of ₹46 in early trade on BSE on July 25 as the one-year lock-in period for promoters, employees, and others end.
Shares of Zomato opened at ₹52.65 against the previous close of ₹53.65 and touched the low of ₹46 soon.
The stock finally closed 11.37% lower at ₹47.55.
The lock-in period for the stock usually ends after a year of listing. The stock of Zomato was listed on BSE and NSE on July, 23.
As Mint reported earlier, with this one-year lock-in of around 613 crore Zomato shares, which is to the tune of 78% of the total paid-up capital of the company, stock market analysts have cautioned sell-off risk in the stock calling it an idea 'sell on rise' stock in short to medium term.
"The stock is under pressure as the one-year lock-in has ended for promoters, company employees, and founders of the company. As per the rule, the equity share capital held by the company before IPO is locked for a period of one year from the date of allotment of shares. The lock-in period on pre-offer equity shares came to an end on July 23. The stock price of Zomato tanked over 72% from its all-time high. The current trend of stocks is looking weak and is expected to move in a downward trend in the near term," said Akhilesh Jat, Category Manager - Equity Research, CapitalVia Global Research.
Independent market expert Kush Ghodasara also pointed out that Zomato shares plunged to an all-time low as the lock-in period of promoters and other pre-IPO investors ended today.
"We saw some profit booking from early investors of the company. As of now, the company has negative earnings per share but the next two quarters might be a turning point for the company as online ordering has reached pre-covid levels. Even the sales have started improving on a QoQ basis but the only question is Zomato Pro membership," said Ghodasara.
"The online food delivery business is almost a duopoly market with Zomato and Swiggy having 80% market share combined. On other hand, Zomato has added Blinkit (formerly Grofers) into his pocket which could bring in more sales in future. Therefore, long-term investors can take this plunge as an opportunity to invest for 5-6 years with a stop loss at ₹41," he added.
Shares of Zomato have been under pressure since its listing. The stock's all-time high level is ₹169.10 which it hit on BSE on November 16, 2021. At present, the stock is down 72% from its all-time high level.
"Zomato has witnessed a significant underperformance since its listing and has fallen a whopping 72% from its all-time high price. The company has been shunned by the investors post the beginning of the rate hike cycle by the central banks globally and the huge sell-off in the tech sector," Punit Patni, Equity Research Analyst, Swastika Investmart observed.
"The company will take significant time to show profitability and the current market sentiments are punishing startups that are growing without showing profits. Therefore, we are averse to Zomato despite its strong position in the online food service platforms and the current correction," said Patni.
Foreign investors and mutual funds reduced their stake in Zomato in the January-March quarter (Q4FY22).
Individually, MFs' stake in the firm in the March quarter has cut to 2.82% from 3.88% in the December quarter. However, individual shareholders' holding in Zomato increased to 9.07% from 7.06% in Q3FY22.
Mohit Nigam, Head - PMS, Hem Securities underscored in the ongoing market correction due to geopolitical crisis and interest rate hikes, share prices of all new age fintech startups have tanked significantly but the worse is not over yet because the stock price of most the world’s top technology companies has seen correction recently.
"The shine of new-age tech stocks is fading away at a very fast pace," he said.
"Given the choice, all big investors, FIIs and DIIs would prefer to invest in leading tech stocks of the world rather than making a risky bet in new age startups. Another reason for investors to be cautious is that the recent ongoing events globally have changed investors’ mindset to invest in new age growth stocks to traditional defensive stocks," Nigam said.
"Investors who are still holding or have freshly entered into these fintech stocks should wait for the market to stabilize to average down the price or make a fresh entry. We do not recommend any fresh entries before any new positive trigger," Nigam added.