Zomato shares nosedive 15% to hit 6-month low on strong volume trade

Shares of Zomato plunged nearly 15% in intraday trade on Wednesday, hitting a 6-month low of ₹44.35 on the BSE, amid strong volume trade. The counter witnessed a surge in selling activities as investors remained concerned about the financial health of the company after the restaurant aggregator decided to shut its 10-min food delivery business, Zomato Instant, less than a year after launch, owing to lack of profitability. 

On Wednesday, Zomato share price opened 0.5% lower at ₹51.85 against the previous closing price of ₹52.10 on the BSE. During the session so far, the stock of the food delivery unicorn declined as much as 14.9% to ₹44.35. At the time of reporting, Zomato shares were quoting at ₹48.60, down 6.7%, while the market capitalisation (m-cap) stood at ₹41,561 crore. There was a spurt in selling activities as 113 lakh shares changed hands over the counter as compared to the two-week average volume of 36.25 lakh stocks. In comparison, the BSE benchmark Sensex declined as much as 900 points, or 1.5%, to 60,081 levels, led by a sharp sell-off in Adani Group stocks after Hindenburg Research said in a report that the 7 listed companies of the conglomerate controlled by billionaire Gautam Adani are 85% overvalued.

The share price of the homegrown footech company trades 9% higher than its all-time low of ₹40.55 touched on July 27, 2022. The stock is down 56% from its 52-week high of ₹100.50 touched on January 25, 2022. In the last six months, the stock has risen 2%, while it has fallen 31% in the past three months. The counter has dropped 16.5% in a month and 4% in a week.

Zomato on Tuesday said it is rebranding its 10-min food delivery service by adding a new menu with its partners. "Instant is not shutting down. We are working on a new menu with our partners and rebranding the business. All finishing stations remain intact, and no people are impacted by this decision," a Zomato spokesperson said.

The Deepinder Goyal-led company issued the statement after reports claimed the food aggregator closed its instant food delivery business after it failed to attract the profitability that the company was hoping for since its launch. The company is now planning to pivot into a new product, as per report.

Zomato Instant was launched in March last year across four stations in Gurugram, which is the company’s headquarters and at one station in Bengaluru.

In a separate development, Zomato CEO Deepinder Goyal said that the food ordering firm has about 800 positions open across five roles. The development came two months after Zomato laid off 520 employees, or 13% of its workforce, after performance evaluation. The job vacancies include Chief of Staff to CEO and roles for generalists, product managers, growth managers, and software development engineers.

In the recent past, Zomato has seen high profile exits, with its co-founder and chief technology officer Gunjan Patidar resigning from his post in January this year. Prior to his departure, three top level executives exited the company in a span of two weeks. These included co-founder Gaurav Gupta, Siddharth Jhawar, ex-vice-president and head of Intercity, and Rahul Ganjoo, head of new initiatives.