NEW DELHI: Shares of online food-delivery and restaurant platform Zomato Ltd. plunged in Mumbai after the end of a lock-up period for investors that had stakes in the company prior to its initial public offering.
The stock dropped as much as 14.3% to a record low of 46 rupees.
Zomato’s offering last July raised close to $1.3 billion and lured investors including Morgan Stanley and Fidelity Investments. China’s Ant Group Co. was an early holder, having initially invested in it in 2018, owning a stake of about 16% before the share sale.
After a surge following the debut about one year ago, Zomato shares pared those gains to now trade about 40% below the IPO price. That compares to a 4.9% increase for the Nifty 50 Index over the same period.
Shares are underperforming the Nifty 50 Index since the debut
Zomato’s successful IPO last year set the tone for the coming-out parties of a generation of Indian unicorns, including digital-payments firm One 97 Communications Ltd. But their shares have also plummeted as doubts persist about the valuations of loss-making technology firms, particularly as global macroeconomic uncertainty mounts.
The company is competing against deeper-pocketed rivals including Amazon.com Inc. and Naspers Ltd.-backed Swiggy, presenting hurdles in how quickly it can become profitable. Its recent acquisition of fellow startup Blinkit in quick-commerce, another high-competition, high-cash-burn segment, has left investors unimpressed.
The delivery giant reported a smaller-than-expected loss for the March quarter. Some analysts anticipate Zomato will narrow its red ink over time, and point out that the meal-delivery market remains in its infancy.
Zomato is the latest Asian technology company to see shares under pressure following the end of IPO lock-up periods. Chinese artificial-intelligence-software maker SenseTime Group Inc.’s collapsed in Hong Kong last month once restrictions on sales by cornerstones ended.