Zomato shares dive 10%; hit all-time low! Is there more pain ahead? 

Shares of food aggregator Zomato dived 10 per cent to hit an all-time low of Rs 51.3 on BSE. Of late, the stock has been in the bear grip amid an ongoing market correction. 

Currently, the stock is down over 70 per cent below its all-time high. It touched an all-time high of Rs 169.10 on November 16, 2021. On a year-to-date basis, the shares have fallen over 62 per cent. 

The scrip closed 7.58 per cent lower at Rs 52.45 against the previous close of Rs 56.75. Market cap of the firm fell to Rs 41,288.29 crore. 

"Fall in tech-based growth stocks across the world, (particularly Nasdaq listed companies) has triggered a fall in shares of Zomato and similar new age non-profit making tech platforms," Divam Sharma, Founder at Green Portfolio told Business Today. 

"Falling global valuation multiples for similar businesses, rise in interest rates, and reducing appetite from FPI investors are further culprits," he said. 

"Another point to note here is the high growth expectations from these companies to sustain high valuation multiples along with high competition from the unlisted competitors have pushed such companies to increase M&A activities to secure in-organic growth," he added. 

He further said that Zomato as a business has achieved a sustainable large market share in the food delivery business. Output from some of the recent business diversifications, acquisitions and experiments are yet to be seen. Retail investors should still stay away from the stock and wait for the visibility of profitability to come before entering the stock. 

Santosh Meena, Head of Research, Swastika Investmart Ltd noted that the current scenario of rate hikes has severely impacted tech stocks; investors have realized that the profitability and cash flows are more important than just revenue growth and their sky-high valuations aren’t sustainable. 

" Zomato dipped to a record low, losing over 70 per cent from its lifetime high. The company is still a loss-making one, and it is expected to break even in terms of operating profitability by FY24, the company was demanding an FY21 P/S multiple of 29.9x during its IPO which was high compared to its global peers, hence, a reality check has led to such severe correction," Meena added. 

Zomato made a bumper debut on bourses with the unicorn hitting the Rs 1-lakh crore market capitalisation mark. The stock opened at Rs 116, 52.63 per cent higher on NSE against the issue price of Rs 76. 

The company reported a narrowing of consolidated net loss at Rs 63 crore for the quarter ending December 31, 2021. The firm had posted a net loss of Rs 352.6 crore in the year-ago period and Rs 429 crore in the previous September quarter. 

 Revenue from operations came in at Rs 1,112 crore, up 82.47 per cent against Rs 609.4 crore in the year-ago quarter. The Deepinder Goyal-led company also declared a consolidated exceptional gain of Rs 316 crore in the December quarter.