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Zomato’s stock has fallen nearly 9% in the last three days

Institutional investors trimmed their stake in Zomato by nearly 2 percentage points, selling 152 Mn shares in Q4 FY22

Indian tech stocks have been witnessing a major slump due to the Russia-Ukraine war. The situation has been further exacerbated by a major correction in the US public markets, as well as prospects of interest rate hikes.

Shares of foodtech giant Zomato have wiped out nearly half of investors’ wealth in the first four months of 2022. The startup’s shares have crashed nearly 48% during this period.

Zomato made a stellar stock market debut on July 14 last year, opening at a 53% premium over its IPO price and clinching a market capitalisation of INR 1 Lakh Cr. 

The overwhelming response to the IPO had reaffirmed the appetite of investors for the new-age tech startups in the country. The momentum kept strengthening and Zomato shares reached their all-time high of INR 160.30 on November 15, 2021.

However, the stock started seeing a gradual fall after it, ending at INR 137.45 at the end of 2021. Since then, the startup’s shares have continued to fall. The share price had stabilised somewhat since March, hovering in the range of INR 80-82. 

However, the stock tanked nearly 9% between April 26-29. On Friday, it ended 2.91% lower at INR 71.70 apiece on the BSE.

What’s Behind The Free Fall?

Indian tech stocks have been witnessing a major slump ever since Russian President Vladimir Putin declared a war on Ukraine. The situation has further been compounded by a major correction in the US public markets and the prospects of interest rate hikes by the Fed. 

Besides, institutional investors have also been cutting down their stake in Zomato. Foreign portfolio investors (FPIs) and mutual funds (MFs) sold 152 Mn equity shares of the startup in Q4 FY22.

A breakdown of the data revealed that MFs sold 83 Mn equity shares, reducing their stake in Zomato to 2.82% at the end of Q4 FY22 from 3.88% at the end of Q3 FY22 . FPIs also offloaded around 68 Mn equity shares, bringing down their stake to around 10.17% at the end of March quarter from 11.04% at the end of December quarter of 2021. .

In addition, the biggest challenge for Zomato has emerged in the form of a recent probe launched into the foodtech giant by Competition Commission of India (CCI). Although Zomato said it would continue to work closely with the antitrust watchdog, the move has spooked investors. 

The CCI ordered the probe in response to a complaint by the National Restaurant Association of India (NRAI) which alleged that Zomato and its rival Swiggy were indulging in unfair pricing and deep discounting.

Amidst all these, Zomato recently also announced ‘10-minute delivery’. However, the move was panned by critics and many accused the listed company of endangering the lives of delivery executives.

Zomato has also ramped up acquisitions to bolster its offerings. In a big move last month, it emerged that egrocery startup Blinkit would merge with Zomato in a share-swap deal. This followed the approval of a $150 Mn loan by the foodtech giant to Blinkit to shore up its services.

Besides, Zomato also picked up a 16.66% stake in food robotics startup Mukunda for $5 Mn in March 2022. Earlier in January, the food delivery company also acquired a 19.8% stake in adtech company AdOnMo for INR 112.20 Cr. Zomato also acquired a 5% stake in B2B software platform UrbanPiper Technologies for INR 37.38 Cr .

Zomato is not the only startup to see major correction in its stock price. Other new-age tech startups such as Policy Bazaar, Nykaa have also seen decline in their share prices amidst the broader selloff in the markets. This has also spooked many startups looking to list on Indian bourses. Delihivery, Oyo and PharmEasy have reportedly deferred their listing plans owing to the market volatility.