The stock of Zomato on Friday hit its lowest point at ₹112.55 on the BSE since its listing July 27, 2021. This could be a sad news for 62,000 new retail investors who had entered the company in the preceding quarter, as the stock fell 20 per cent year-to-date. Besides valuations concern, the recent announcement by the Centre to collect and deposit tax at 5 per cent by food aggregators such as Swiggy and Zomato from New Year, triggered the downfall ‘sentimentally’, said analysts.
The IPO of Zomato that had raised 9,375 crore from public was subscribed over 38 times in July last year. Currently, 7.88 lakh small investors hold 1.6 per cent in the food delivery major. In the IPO, 6.378 lakh small investors were allotted shares. Zomato, which came out with an IPO price of ₹76, rose to a high of ₹169 on November 16, 2021. Since then, the stock has been falling steadily.
MFs turn smart
Apart from retail investors, foreign portfolio investors and high net worth individuals too increased their stake in Zomato during October-December 2021. FPIs stake rose to 11.04 per cent from 9.87 per cent and HNIs to 5.46 per cent (5.33 per cent). However, mutual funds appeared to be smarter, as some of them booked profits when the stock zoomed sharply. MFs holding reduced to 3.88 per cent from 4.40 per cent. JP Morgan in a September 2021 report said: “We initiate coverage of Zomato at Underweight with a price target of Rs 120.” Zomato shares are trade at a substantial premium to global peers. “We see material downside from current peak unit economics due to fading average-order-values (AOV) from structural and cyclical factors, a spike in discounts needed to grow the market in the long term and limited scope for share expansion,” it added.