Zomato share price declined 5 percent on Tuesday, extending losses from the previous session. The stock has fallen more than 13 percent in two trading sessions.
The selling pressure in Zomato shares came after the lock-in period for anchor investors ended on August 24. Anchor investors are institutional investors such as mutual funds or sovereign wealth funds that buy a substantial number of shares in an IPO-bound company.
Ahead of its Rs 9,375-crore IPO during July 14-19, the online food delivery company had witnessed a strong response from global and domestic institutional investors for its anchor book.
Zomato had allotted a total of 55.21 crore equity shares worth Rs 4,195 crore at Rs 76 apiece, the higher price band, to around 186 anchor investors that included names such as Tiger Global, BlackRock and World Fund.
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These anchor investors have a 30-day lock-in period post-allotment. This means they cannot sell their shares before 30 days from the date of allotment. Zomato shares debuted on bourses on July 23, 2021.
As the lock-in period ended on Monday, these anchor investors opted booking profits on their investments and hence, a huge chunk of Zomato shares came on the block for selling.
However, analysts are of the view that the company’s fundamentals remain intact based on the company’s market leader position in the food delivery vertical and growth opportunities lying ahead.
“Zomato’s IPO paved the way for a new era as the company gained hugh value on listing due to its unique business model, being the first of its kind listed company and also due to the company attracting humongous Anchor books. Although the company is loss-making it is enjoying good valuations considering future prospects,” said Rahul Sharma, Co-Founder, Equity99.
Sharma advises long-term investors to maintain their position with stop-loss of Rs 105.
Meanwhile, ICICI Securities expects Zomato to deliver 46 percent/33 percent revenue CAGR over the next 5/10 years on the back of strong demand tailwinds.
The brokerage is of the view that Zomato is one of the least vulnerable internet companies across the world for a regulatory tech-lash.
“At 0.5x FY24E PEG, Zomato is way cheaper v/s median food services (1.9x), technology (1.8x) or consumer (2.9x) stocks. We value it at 55x 2-year forward P/E, in-line with median consumer discretionary multiple,” ICICI Securities said.
The brokerage initiated coverage on Zomato with a 'buy' rating and a target price of Rs 220 per share.
First Published: Aug 24, 2021 12:55 PM IST
