Since its initial public offering in July 2021, Zomato share prices have reduced the value of investors by around Rs. 97,000 crores. Among India’s publicly traded technology platform companies, Zomato’s stock price has been hit the worst.
⦁ In comparison to where it was a year ago, the stock price has dropped by more than 70 per cent. When the share price fell to Rs. 46 per unit on July 25, 2022, it was the lowest price ever recorded.
⦁ Despite the delight expressed by many of Zomato’s customers, investors are less than pleased. Since reaching its one-year peak of Rs. 160 per unit in November, the Zomato stock value is now on a precipitous decline and is currently in freefall.
⦁ This is the second time in as many months that the company’s stock has taken such a beating following its acquisition of fast commerce startup Blinkit previously Grofers.
⦁ Zomato’s share price had dropped by more than twenty percent in the ensuing four trading sessions after the company announced the news.
⦁ There is a good chance that the most recent decline in Zomato stock prices can be traced back to sellers rushing to unload their holdings in expectation of future declines in stock prices after the one-year lock-in period came to an end last week.
(Note: The information provided in this blog is for educational purposes only and is not meant to be used as a substitute for professional advice. You should not make any financial decisions based on this information. Investing in the capital markets is regulated by laws and regulations. Please seek the advice of a financial professional before making any investments.)
Reasons Behinds Falling of Zomato Share Prices
Approximately 613 crore or 78% of Zomato’s stock saw its one-year lock-in expire on July 23rd, causing a decline. Approximately 78% of the one-year overhang on the platform’s entire paid – up share capital is expected to be sold off this week, according to experts. The below mentioned are some of the possible reasons of falling the Zomato shares prices
⦁ This week, Zomato’s share price fell by more than 10% to a new 1-year low because of suspicions that significant institutional investors are selling the stock.
⦁ These Zomato shareholders’ lock-in period ended before few days.
⦁ Pre-IPO investors are now free to sell their equity after the expiration of the lock-in period.
⦁ Profits are being harmed by a GST rate.
⦁ Buying blinkit, which is losing money,
⦁ Zomato continues to lose money in its financial statements.
⦁ Opinions that are unfavorable concerning the company’s inorganic expansion tactics.
⦁ Zomato continues to lose money in its financial statements.
⦁ More secrecy in the reporting of commercial transactions.
⦁ As of the 1-year overhang, the food aggregator has over 78% of its total stock paid-up in capital. No promoters own this company; hence it must lock its equity share capital for a year after shares are issued. They are not allowed to sell any stock during this time period.
Zomato And Other Start-Ups with IPOs
⦁ Zomato’s stock price is now falling due to a variety of reasons. Existing competitors like Swiggy and restaurants that offer direct delivery have all increased rivalry for Zomato, as have new entrants and new competitors alike.
⦁ Due of the steep discounts Zomato has been forced to offer, many of its current partners are refusing to continue working with the food aggregator.
⦁ So far, the company’s strategy has been to compel businesses to offer astronomical discounts in order to keep people on board. Regulations limiting platform firms’ growth and the difficulty of expanding outside of Zomato’s core area are just two of many obstacles the company faces, all of which add to its current woes and raise new questions for the company about its future direction. Zomato share prices have fallen significantly as a result of this combination of reasons.
⦁ Since Zomato’s operational revenue is extremely large, experts believe the company has a cash flow problem. Apparently, the volume is a huge factor in Zomato’s economic model, which isn’t apparent in its peers. But Zomato wasn’t the only firm to experience a significant drop in stock value after going public.
Conclusion:-
⦁ Zomato share prices have fallen significantly as a result of combination of reasons. To create a company, Zomato takes a long-term, strategic approach. As a result, assessing Zomato solely on the basis of its present rectification would be unjust.
⦁ Zomato revealed earlier this month that it had paid Rs 4,447 crore for the loss-making startup Blinkit. Hands on Trades Pvt Ltd. would be purchased for Rs 60.7 crore in cash and Zomato will issue 629 million shares at the mandated preferred allocation price of Rs 70.76, resulting in a 6.88 percent equity dilution on a fully diluted basis.
⦁ When Zomato’s acquisition was announced, its stock price dropped more than 14% in just two days as investors and experts alike deemed the Blinkit deal expensive. The acquisition of Blinkit will exacerbate Zomato’s financial troubles, according to experts.
⦁ When compared to the initial offering price of 76 rupees, the first public offering (IPO) price for Zomato was set at 116 rupees, which represented a premium of 53%. Investors flocked to the food aggregation business in the prospect of making huge profits, and it reached to an all-time high of Rs 169.10 over several months.