Zomato shares hit new all-time low; here’s why

Shares of Zomato, the country’s largest food delivery company, extended fall on Wednesday and dropped as much as 1.4% to hit a new low of ₹75.55 on the BSE. The stock has fallen 9.5% over the past one month and more than 45% since the beginning of the calendar year 2022. Shares of the restaurant aggregator traded 55% lower than its all-time high of ₹169.10 touched on November 16, 2021.

On Wednesday, Zomato shares opened 4.4% higher at ₹79.95 against the previous close price of ₹76.60 on the BSE. However, the stock soon pared gains and slipped into negative terrain to hit a fresh low, in an otherwise positive market. At 12 PM, the stock was trading 0.2% lower at ₹76.45, while the BSE Sensex climbed 1.4% to 56,584 points.

What triggered a sell-off in Zomato shares?

The share of homegrown food delivery major dived amid reports that the company is in talks to acquire online grocery firm Blinkit (formerly Grofers). However, there is no official confirmation about the proposed deal.

The company in an exchange filing on Tuesday said it has received its board nod to grant a loan of up to $150 million (around ₹1,145 crore) to online grocery shopping player, Grofers India Pvt Ltd (GIPL).

“The board and the company at its meeting on March 15, 2022, has approved grant of loan up to $150 million to Grofers India in one or more tranches and delegated the authority to the senior management of the company to decide the key terms of the loan and execute the definitive documents at a future date,” Zomato said.

As per the company, the interest rate for the loan will be 12% per annum or higher with a tenor of not more than 1 year. This loan will support the capital requirements of GIPL in the near term and is in line with the company’s stated intent of investing up to $400 million cash in quick commerce in India over the next two years, it added.

In a separate development, the board of the company also gave a nod to the acquisition of a 16.66% stake in Mukunda Foods, a food robotics company, for $5 million.

“The board has approved the acquisition by way of subscription of 13,289 Series B1 compulsorily convertible preference shares and 10 equity shares collectively aggregating to 16.66% of the share capital of Mukunda Foods Private Limited on a fully diluted basis, for an aggregate cash consideration of Indian rupee equivalent of $5 million,” Zomato said in a filing to the BSE.

The proposed investment is subject to fulfillment of certain customary conditions precedent and other terms and conditions agreed under the investment agreement executed between the parties, it added.

Mukunda is a food robotics company that designs and manufactures small robotic equipment to automate food preparation for restaurants. Their products enable restaurants to scale rapidly while maintaining consistency in food quality and customer experience across multiple outlets. Mukunda also helps restaurants to become more efficient by reducing manpower cost, wastage and increasing kitchen throughput.

“Our investment will help Mukunda Foods scale faster, help reduce restaurant food prices, expand margins, and enhance customer delight,” it added.