Zomato Stock Slumped 9% as Lock-In for Anchor Investors Ends

Famous food tech giant Zomato’s shares slumped by 9% on the BSE on Monday, 23 August 2021. This followed after the end of mandatory lock-in period of 30 days set for the anchor investors. Shares of the online food delivery company plummeted over 3% to reach Rs. 123 per share on the BSE in Tuesday’s opening. With this recent slump, Zomato registered a fall of more than 13% during the past two days.

Here’s more on this latest development.

Zomato Share Slump – A Closer Look

Zomato stock opened at Rs. 138.10, but dropped to Rs. 127 by the day end.

Following the share fall, Santosh Meena, Head of Research of Swastika Investmart, said that selling pressure is evident in most counters for 1-2 days post the end of the lock-in period. However, this acts as a buying opportunity in most outstanding stocks, where the lows extend strong support for the upcoming rallies.

He further said that in the case of Zomato, the recent fall is robust support, and investors could predict some buying attraction on all sides of this level.

Moreover, domestic research and brokerage firm ICICI Securities believes that Zomato is a great value stock. ICICI Securities has already issued coverage with a Buy rating on Zomato. While seeing a giant upside on the food delivery company, it set a target price of Rs. 220 for each equity share.

What does the brokerage firm say in this situation?

ICICI Securities issued a note highlighting that Zomato has witnessed a sharp drop in key metrics during the first wave compared to its global peers such as Amazon and DoorDash, among others.

It further believes in a steady and complete recovery for Zomato. Nevertheless, the brokerage also believes that AOV normalisation and surging bargaining powers of restaurants are some variables to look forward to in the market.

Zomato’s Financial Performance – At a Glance

According to foreign broking house Jefferies, Zomato reported a significant revenue beat of +37% Quarter on Quarter in Gross Order Value (GOV). However, Jefferies also said that this revenue cut results from less dining experience due to the impact of the second wave of pandemic across India.

However, amidst this revenue fall, the food-delivery company’s shares rose to 6% after completing its billionth order in mid-August. Here are a few highlights relating to the firm’s latest milestone:

• Net loss grew to Rs. 356 crores during the quarter ending on 30 June 2021 as opposed to Rs. 99.98 crores in Q1 FY21.
• Expenses flew to Rs. 1259.7 crores during Q1 FY22. This happened primarily due to increased employee benefits amounting to nearly Rs. 390.7 crores. Zomato bought stock-in-trade worth Rs. 74.7 crores.

Bottom Line

It is evident that there is a negligent fundamental change in the way the investors perceive the business. Moreover, market investors also believe that Zomato’s liquidity is expected to increase because of increased share availability.  This continues to manifest as an upside for this company and its prospective investors.

Frequently Asked Questions

1. What is the market cap of Zomato?

At the time of writing, Zomato’s market capitalisation stood at Rs. 98,692.36 crores.

2. Who is an anchor investor?

As per SEBI, an anchor investor is a qualified institutional buyer who makes an application for at least Rs. 10 crores in a public issue. These investors are not allowed to trade their shares for 30 days after the listing.

3. Why are anchor investors disallowed to trade their shares till 30 days after listing?

SEBI restricts anchor investors to trade their shares for 30 days to save the individual retail investors from suffering.