Stocks of the Indian online food delivery and restaurant platform reached an all time low on Monday, dropping 14%.
Zomato's shares on Monday dropped after the end of a lock-up period for investors who owned stakes in the company before its initial public offering. The Indian food delivery service's stocks dropped as much as 14.3% to just 46 rupees, an all-time low for the company, which was founded by Deepinder Goyal and Pankaj Chaddah in 2008.
According to Bloomberg, Zomato's first offering in July 2021 raised almost $1.3 billion and caught the attention of investors such as Morgan Stanley, Fidelity Investments, Tiger Global, T. Rowe Price, and Steadview, among others. Also an early holder was China's Ant Group Co., who initially invested in the company in 2018. At the time, it owned about 16% before the share sale.
Zomato investors had purchased shares at 76 rupees, TechCrunch reported. The company's founders and shareholders owned about 78% stake in the Indian food delivery firm before the listing and were allowed to sell without disclosure from July 23.
Now, Zomato shares have lost more than 60% of their value since it was listed last year, casting doubt on its proposal to acquire instant delivery firm Blinkit. Many analysts believe the deal is overpriced and tainted with conflict of interest.
What Happened to Shares of Zomato in the Last Year?
Data from the National Stock Exchange (NSE) showed that 4.81 crore equity shares of Zomato, which were worth 234.75 crore Rupees, had changed hands as of 9:40 a.m. Monday, the Economic Times reported. Sebi rules suggest that if the company has no identifiable promoters, then its pre-IPO shares would go under lock-in for a year.
Over 613 crore shares of Zomatop were under lock-in since July 23, 2021, making up 78% of the shareholding of the company. Its key shareholders, Uber BV, InfoEdge, AntFin Singapore and Alipay would now be able to sell their shares.
What's Next for Zomato
Zomato, which was incorporated in 2010, is one of India's leading online food service platforms that offers food delivery and dining-out services such as search and booking. Today, its shares have lost up to 72% of its value from its all-time high of 169.10 Rupees, while its stock is trading 38% below the issue price of 76 Rupees.
Zomato's acquisition of Blinkit poises them for entry to the instant grocery delivery space, a competitive category in which it would go head to head with Y Combinator-backed Zepto. Meanwhile, Zomato is also competing with Swiggy, a younger company that raised capital in a round from investors such as INvesco during a of $10.7 billion earlier this year.
In May, Zomato hit pause on new subscriptions to its Pro Plus loyalty program, Money Control reported. Sources aware of the developments said that one of the reasons why the earlier version of Zomato Plus did not take off was because it diminished its restaurant dine-in benefits and focused on online food ordering benefits. Now, the company is working in-house to improve its dine-in friendliness in the face of relaxed Covid restrictions.
