Zomato shares slip for the second straight session, here's why

Zomato share fell for the second straight session today after the lock-in period for anchor investors of the company came to an end. Share of Zomato fell up to 5.03% to Rs 120.60 against previous close of Rs 127 on BSE.

Total 31.91 lakh shares changed hands amounting to turnover of Rs 39.57 crore.

Later, the stock closed 1.46% lower at Rs 125.15.

Market cap of the food delivery firm fell to Rs 98,182 crore on BSE.

On Monday, the stock fell up to 10% intra day to Rs 124.75 against previous close of Rs 139.30.

Zomato made its  market debut on July 23, 2021. Zomato share listed at a premium of over 52% to IPO issue price. Share of Zomato opened at Rs 116, 52.63% higher on NSE against issue price of Rs 76. Market cap of the firm crossed Rs 1 lakh crore mark on the listing day.

Shares in the IPO were offered in a price band of Rs 72-76. The firm raised Rs 9,375 crore from the IPO. The issue was open from July 14 to July 16.

Anchor investors buy a large amount of shares in a company a day before its IPO opens. They are big institutional investors such as mutual funds or sovereign wealth funds among others.

They have a 30 day lock-in period post-allotment. This means they cannot sell their shares before 30 days from the date of allotment.

ICICI Securities has given a buy call on Zomato with a target price of Rs 220.

"On the back of strong demand tailwinds covered at depth in food-tech thematic - (link), the brokerage expects 46%/ 33% revenue CAGR over the next 5/10 years. Unlock should not have a noticeable decelerating effect like in case of global tech (e.g. Amazon, DoorDash). As growth / profit after tax margins are yet to reach steady state, price earnings to growth (PEG) ratio is better compared to price earnings ratio for relative comparisons. At 0.5x FY24E PEG, Zomato is way cheaper v/s median food services (1.9x), technology (1.8x) or consumer (2.9x) stocks," the brokerage said.

"The end of the one-month lock-in period for anchor investors along with problems in the US operations have led to a meaningful correction in Zomato shares. Technically, Zomato still looks weak on the charts and a daily close below Rs 120 could trigger a further correction till Rs 104 in the near term. 131 will be strong resistance," said AR Ramachandran, co-founder & Trainer, Tips2Trades.

 Last week, the firm said it has dissolved and wound up its step-down subsidiary in the US, a month after the food delivery company listed on the Indian stock exchanges.

Zomato USA was not a material subsidiary of the company and did not have any business activity and its dissolution will not affect the turnover/revenue of the company, it added.