Fear gripped D-street over the potential Russian invasion of Ukraine. During this Zomato shares were one of the worst-hit after plunging 8% to hit an all-time low of Rs 75.75. But what led to this catastrophic fall in the share price of this Food delivery app? Did it have anything to do with geopolitical tension?
A few months back Zomato had a prolific entry through its IPO. Its stock is listed at an IPO premium of 66%. After issuing the stock at Rs 76 it rocketed to Rs 169 creating an all-time high. Unfortunately for the company the stock today trades at a price of Rs 86. Just Rs 10 more than its issue price.
Did Zomato have a basis for its increase?
Since the disruption of Covid-19, the Indian stock showed a bullish recovery and reached at the time high levels. Lots of new investors were attracted to this bullish and this increased the overall volume and flow of credit in the market.
With new tech in the trend means good prospects created a buzz and everybody was eager to participate in these IPO’s.
With support from the investors, the company’s valuation jumped from Rs 50,000 to Rs 1,00,000 Cr. the company’s valuations reached 1.33 Lakh Crore and now with the current corrections, it fell to Rs 61,401 Cr.
What are the Reasons for Zomato Shares fall?
- With liquidity flow in the market being favorable for these new unicorn businesses flourished over the last year. Since January there has been a lot of news around quantitative restrictions which has been impacting the flow of the liquidity in the market further impacting these new-age technology businesses.
- The quantitative restrictions by the US Fed have led to an abrupt money outflow and correction of markets around the world.
- With the negative sentiment in the market new comparatively smaller companies have been severely impacted in comparison to other established ones.
- Zomato’s woes further worsened after it posted continuous losses during the the FY22 Q3 results too. The company posted a net loss of Rs 63 Cr.
- Tech companies are widely recognized for their nature of falling drastically as they are valued highly due to their high growth prospects but these take a massive hit in the times of bear markets. As the valuation looks overvalued, the correction deepens.
- Further the Exit of Private equity fund was the latest blow the stock suffered from. This further caused a fall in the Zomato share price.
Is a long-term bet with Zomato Shares worth it?
As per market gurus, Zomato is a very strategic and long-term approach to building a business. So, judging Zomato based on its current correction would be unfair. Investors should focus on the value investing approach and keep patience during these times.
Have you invested in Zomato’s stock? Let us know in the comments below!
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Shall we apply for the next tech stock’s IPO?
I bought 100 shares at 77 and i’m hoping it goes up.