Zomato sinks as pre-IPO lock-in ends
Shares of Indian online food-delivery and restaurant platform Zomato Ltd. plunged in Mumbai after the end of a lock- up period for investors that had stakes in the company prior to its initial public offering.
The stock dropped 11.37% to a record low of ₹47.55.
Zomato’s offering last July raised close to $1.3 billion and lured investors including Morgan Stanley and Fidelity Investments. China’s Ant Group Co. was an early holder, having initially invested in it in 2018, owning a stake of about 16% before the share sale.
After a surge following the debut about one year ago, Zomato shares pared those gains to now trade about 40% below the IPO price. That compares to a 4.9% increase for the Nifty 50 Index over the same period.
Zomato’s successful IPO last year set the tone for the comingout parties of a generation of Indian unicorns, including digital-payments firm One 97 Communications Ltd. But their shares have also plummeted as doubts persist about the valuations of loss-making technology firms, particularly as global macroeconomic uncertainty mounts.
The company is competing against deeper-pocketed rivals including Amazon.com Inc. and Naspers Ltd.-backed Swiggy, presenting hurdles in how quickly it can become profitable. Its recent acquisition of fellow startup Blinkit in quickcommerce, another high-competition, high- cash- burn segment, has left investors unimpressed.
“The shine of new age IT stocks is fading away at a very fast pace,” said Mohit Nigam, a fund manager with Hem Securities Ltd. Zomato’s $570 million acquisition of quick-commerce firm Blinkit, which loses ₹84 ($1.10) per order, has acted as a catalyst in the stock’s downward movement, he said.
The delivery giant reported a smaller-than-expected loss for the March quarter. Some analysts anticipate Zomato will narrow its red ink over time, and point out that the meal-delivery market remains in its infancy.
Meanwhile, Indian shares broke their longest gaining streak since last October on Monday, as automakers slid and index heavyweight Reliance Industries dragged after its earnings fell short of expectations.
The NSE Nifty 50 index fell 0.53% to 16,631, while the S&P BSE Sensex slipped a tad more to 55,766.22, after rising for six straight sessions.
Reliance Industries fell 4% in its biggest intraday percentage drop in more than three weeks, after its first- quarter profit missed estimates on a surge in costs.