Zomato shares fell to a record low on Monday morning as the lock-in period for pre-IPO shareholders (promoters, employees & other institutions) had ended. The shares were down nearly 12 per cent in early trade. The food chain platform’s total paid-up capital of the one-year overhang is around 78 per cent and market experts were expecting sell-off pressure for the Zomato shares this week. The public issue of Zomato Limited was listed on BSE and NSE on July 23, 2021.
The lock-in period on pre-offer equity shares came to an end on July 23. This rule is applicable to such companies, which do not have promoters—Zomato is one of these companies with zero promoter holdings. As per the rule, the company which does not have promoters, 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. During this period, these shareholders are barred from selling any equity.
Punit Patni, Equity Research Analyst, Swastika Investmart Ltd., said: “Zomato Ltd. has witnessed a significant underperformance since its listing and has fallen a whopping 71 per cent 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. Further, 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 Ltd. despite its strong position in the online Food Service platforms and the current correction.”
One of the earliest investors on Zomato’s cap table is Info Edge. Although the Sanjeev Bikhchandani-led company registered a gain of Rs 357 crore from the public issue last year, it still holds a 15.18 percent stake in the food delivery company amounts to more than Rs 6,330 crore.
According to Zomato’s IPO prospectus, the average share price at which Info Edge bought the Zomato shares was Rs 1.16. However, the company has not revealed the average price of acquisition for other large shareholders in its filings.
Zomato’s cap table includes pre-IPO and early investors like Alipay (7.1 per cent), Ant Financial (6.99 per cent), Tiger Global (5.11 per cent), Sequoia Capital (5.10 per cent) and Temasek (3.11 per cent).
According to experts, investors should watch what shareholders such as Uber and Delivery Hero do after the lock-in expires. Given that these companies are themselves under pressure due to an imminent global slowdown, they might look to cash out their holdings in Zomato.
While ride-hailing major Uber owns a 7.78 per cent stake in Zomato, food tech company Delivery Hero boasts a 1.36 per cent shareholding.
Zomato shares opened downside in early morning deals on Monday and went on to breach its life-time low of Rs 50.05 apiece and record a new life-time low of RS 47.50 within a few minutes of the stock market’s opening bell today.
Shares of Zomato were listed on BSE and NSE on July 23, 2021, at a strong premium of more than 51 per cent. After bumper listing, Zomato shares went on to make its lifetime high of Rs 169 per share levels in November 2021 breaching Rs 1 trillion market valuations during its post-listing rally.
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