Zomato Shares Decline As Lock-In For Anchor Investors Ends

The logo of Zomato. (Photographer: Dhiraj Singh/Bloomberg)

Zomato Shares Decline As Lock-In For Anchor Investors Ends

Zomato Ltd.’s stock fell the most in three weeks after the mandatory one-month lock-in for the shares allotted to anchor investors during the company’s initial public offering ended.

The Ant Group-backed online food aggregator had received about 35 times more bids from anchor investors than what was on offer.

The company had raised about Rs 4,200 crore by allocating nearly 55.2 crore shares to 186 anchor investors, including Morgan Stanley Investment Fund, New World Fund, Tiger Global Investment Fund, Fidelity Fund Canada Pension Plan Investment Fund. Domestic mutual funds including SBI, Axis, Aditya Birla, Kotak, Motilal Oswal, Nippon India, HDFC were also allocated shares.

The shares were sold at Rs 76 each to anchor investors, and Indian funds got about a third of such allotment.

Zomato’s IPO, the first by a food tech company in India, was subscribed more than 40 times on the final day of bidding.

Shares of the Gurugram-based company fell as much as 7.2%, the most since July 30, to Rs 129.3 apiece around noon on Monday. But the stock has gained 71% since its listing on the bourses.

Here’s what brokerages have to say about Zomato...

ICICI Securities

  • Initiates coverage with a ‘high conviction buy’ with a target price of Rs 220, implying a potential upside of 60.5%.

  • Congruent menu prices across Zomato, Swiggy and direct ordering apps, which are greater than versus dine-in, potential for surprise on discounts and increase in delivery fee strengthen the brokerage’s conviction that industry will remain a duopoly with discount/cost discipline and demand inelasticity.

  • Maturing customer cohorts, restaurants and delivery dynamics will likely lead a ‘J’ shaped improvement in unit economics over FY21-23.

  • Given street’s ‘unreasonably’ pessimistic margin estimates, the brokerage expects a big surprise by FY23.

  • On the back of strong demand tailwinds covered at depth in food-tech thematic, the brokerage expects 46%/33% revenue CAGR over the next five to 10 years. Unlock should not have a noticeable decelerating effect like in case of global tech (e.g. Amazon, DoorDash).

  • The brokerage’s deep dive into the regulatory framework suggests Zomato is one of the least vulnerable internet companies across the world for a regulatory tech-lash.

  • Upside risk to estimates and target multiple is likely as discounts turn out to be lower versus the brokerage’s base case and company scales up in attractive adjacencies.


  • Maintains ‘outperform’ rating with a target price of Rs 170, implying a potential upside of 36%.

  • Zomato’s food delivery business reported the strongest ever performance across all metrics — gross order value, number of orders, active restaurant partners and active delivery partners.

  • Company delivered strong growth in a challenging Q1 where around 35% of employees were battling Covid in their households.

  • Food delivery business was contribution positive although contribution margin reduced slightly compared to Q4FY21 on account of growth investments.

  • The company has taken key steps to strengthen the delivery partner network with an improved payout structure with earnings per order 15% higher, extended cash limit to utilise cash collected from cash on delivery orders, remote onboarding and home delivery of assets, better insurance benefits and simplified cashless settlement of claims.

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