Zomato shares hit record low, declines over 12%—Here's what led to massive fall in stock price

Zomato share price today: Shares of Zomato fell over 12% to a new 52-week low in Monday's intraday trade. The stock declined 12.5% to Rs 46.80 per share in early trade on the BSE. On its fresh 52-week low, the counter is trading at a discount of 72.3% from its year-high value of Rs 169.10 per share. Zomato stock traded on 52-week high value of Rs 169.10 per share on November 11, 2021.  

The primary reason behind the drop in the stock price was that around 613 crore shares came out of mandatory one year lock-in on July 23, and are available for normal trading.  

This was reported by Zee Business earlier. Zee Business research analyst Arman Nahar had earlier said that shares of Zomato can see a massive sell-off after July 23.  

Apparently, the lock-in period on pre-offer equity shares came to an end on July 23. This rule is applicable to such companies, which do not have promoters—Zomato is one of these companies with zero promoter holdings.   

As per the rule, the company which does not have promoters, the equity share capital held by the company before IPO is locked for a period of one year from the date of allotment of shares. During this period, these shareholders are barred from selling any equity.    

Among major shareholders who hold pre-offer equity shares are Info Edge, Uber BV, Alipay Singapore and Antfin Singapore. These shareholders collectively hold 77.9% of the current share capital.   

 Meanwhile, similar companies with no promoters' holdings whose mandatory lock-in will expire this year are CarTrade Tech Ltd, PB Fintech and One 97 Communication (Paytm). CarTrade Tech will see mandatory lock-in easing on August 20, while PB Fintech and Paytm's restrictions on sell of pre-equity share will end on November 12 and November 17 respectively. 

What should investors do? 

"Zomato Ltd. has witnessed a significant underperformance since its listing and has fallen a whopping 71% from its all-time high price. The company has been shunned by the investors post the beginning of the rate hike cycle by the central banks globally and the huge sell-off in the tech sector," said Punit Patni, Equity Research Analyst, Swastika Investmart Ltd 

Further, the company will take significant time to show profitability and the current market sentiments are punishing startups that are growing without showing profits, he said.  

"Therefore, we are averse to Zomato Ltd. despite its strong position in the online Food Service platforms and the current correction," he said.