The stock hit a low of Rs 75.75 on BSE, down 8% from its issue price. The share has been down for four consecutive sessions falling around 20% in this period.
The stock hit an all time high of Rs 169.10 on BSE on 16 November 2021 and has declined over 55% since. The stock was a massive wealth creator surging around 65.79% on listing day. The firm raised around Rs 9375 crore via the IPO.
The continued slide of the stock comes after many investors expressed dismay at recent acquisitions which were done at higher valuations. Last month, Zomato announced that it will buy a 19% stake in adtech company Adonmo for an aggregate cash consideration of Rs 112 crore and purchase a 5% stake in B2B software platform UrbanPiper for Rs 37.38 crore.
Analysts say Adonmo's FY21 revenue stands at Rs 3.3 crore. And Zomato values the firm at Rs 560 crore and 187x price to sales. UrbanPiper, which has Rs 6.30 crore revenue for FY21, will get valued at Rs 750 crore and 125x price to sales.
"One should definitely ask the management why they paid such high multiples for these companies," analysts said on condition of anonymity.
"It seems as if Dalal Street is spooked with the recent acquisitions of Zomato which were done at 100+ price to sales metrics. Also, the management has been very bullish about food delivery in India but recent stagnation in order value and active customers did not point towards that. Finally, investors are in the dark as the company hasn't done a single conference call with analysts/investors after listing and they have said that they are not even going to do one which may leave stakeholders with more ambiguity than clarity," Aditya Kondawar, COO, JST Investments.
Recently the firm's December quarter showed its net loss narrowed to Rs 63 crore against Rs 353 crore last year. Revenue from the operations was Rs 1,112 crore, up 82.7 percent against Rs 609.4 crore a year ago.
Gross Order Value (GOV) grew 1.7 percent QoQ to Rs 5,500 crore. Weak GOV growth was due to reduction in delivery charges and post-Covid reopening resulting in a shift towards dining out.
"After a strong 2Q, an underwhelming GOV (+1.7% QoQ) in 3Q will raise questions on India's opportunity. Earnings release remains opaque, lacks substance, and describes only selective aspects of the business. Lack of management call leaves a lot to the imagination and our inexperience with the internet sector does not help either. Following a weak 3Q (lower loss, though) and pullback in global comps," said Jefferies India in a note to investors.
Jefferies India has cut the FY22-26 GMV by 4-9% to reflect the muted performance in 3Q. "While 2Q nudged us to build a faster topline at the cost of profitability, we now trim growth, but raise profitability. The past two quarters signal how unpredictable this business (& probably Internet sector) is likely to be, but we remain confident on the structural India growth story," Jefferies report added.
According to JP Morgan's 24 January report, Zomato stock fell due largely to macro factors that have led to a global tech selloff, as the downward spiral has accelerated since the beginning of the year. Zomato has corrected faster than peers recently; its correction from its 52 week high is in line and the stock continues to trade at a sharp premium to global peers.
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