Zomato share price declined over six percent on Monday as the lock-in period for the company's anchor investors ended, leading to high share sales volume on stock exchanges.

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Anchor investors are big institutional investors such as mutual funds or sovereign wealth funds that buy a substantial number of shares in an IPO-bound company.

Anchor investors have a 30-day lock-in period post-allotment. This means they cannot sell their shares before 30 days from the date of allotment. Zomato shares debuted on bourses on July 23, 2021. Zomato was listed on exchanges on July 23, 2021.

Meanwhile, ICICI Securities initiated coverage on Zomato with a 'buy' rating and a target price of Rs 220 per share.

The brokerage firm expects 46 percent/ 33 percent revenue CAGR over the next 5/10 years on the back of strong demand tailwinds. It believes unlock should not have a noticeable decelerating effect like in the case of global tech companies such as Amazon and DoorDash.

It is of the view that Zomato is one of the least vulnerable internet companies across the world for a regulatory tech lash.

"As growth / PAT margins are yet to reach steady-state, PEG is better v/s P/E for relative comparisons, in our view. At 0.5x FY24E PEG, Zomato is way cheaper v/s median food services (1.9x), technology (1.8x) or consumer (2.9x) stocks. We value it at 55x 2-year forward P/E, in line with the median consumer discretionary multiple," ICICI Securities said.

Upside risk to our estimates and target multiple is likely as discounts turn out to be lower v/s our base case and the company scales up in attractive adjacencies, it added.

Given the street’s ‘unreasonably’ pessimistic margin estimates, the brokerage house expects a big surprise by FY2. Steady-state EBITDA margin/ROE for the platform will likely be around 38 percent/20 percent.

At 11:00 am, the shares of Zomato were trading 6.46 percent lower at Rs 130.25 apiece on the BSE.

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First Published:Aug 23, 2021 11:29 AM IST