Shares of Zomato experienced a setback on Wednesday (June 14) as they slumped by 5.4% to INR 74.07 on the Bombay Stock Exchange (BSE). This decline marked the end of an impressive eight-session winning streak for the company’s shares, which had been on a rising spree since June 2. Notably, the stock had also recently reached its 52-week high level, adding to its bullish momentum.
The drop in Zomato’s shares can be attributed to the company’s announcement that its step-down subsidiary, Zomato Australia Pty Limited, located in Australia, has been deregistered as of June 11, 2023. Zomato had previously initiated the liquidation process of this subsidiary, along with its New Zealand counterpart, Zomato NZ Media Private Limited, on March 31.
Zomato clarified that these subsidiaries had no active business operations and were not significant contributors to the foodtech giant’s revenue. Therefore, the dissolution of these entities is not expected to have a material impact on Zomato’s financials.
In its red herring prospectus (RHP), Zomato disclosed that Zomato Australia Pty Limited generated a royalty income of INR 5.3 lakh in the fiscal year ending March 31, 2021.
Zomato has undertaken various restructuring measures in recent quarters as part of its efforts to achieve profitability. These include the liquidation of Zomato Ireland Limited – Jordan, another step-down subsidiary based in Jordan, earlier this year. The company has also made strategic decisions such as discontinuing its operations in partnership with Kuwait-based food delivery app Talabat in the United Arab Emirates (UAE) and exiting around 225 smaller cities in India due to poor performance.
Despite these challenges, Zomato has made significant progress, as indicated by achieving adjusted EBITDA profitability, excluding its quick commerce business, in the fourth quarter of fiscal year 2023. Additionally, the company reported a narrowed net loss of 48% year-on-year to INR 187.6 crore in the quarter, despite muted growth in the food delivery sector.
While Zomato has been making strides in its business, it continues to grapple with issues surrounding its controversial ‘Kachra’ advertisement released on World Environment Day. Although the company has removed the contentious advertisement, it now faces a notice from the National Commission of Scheduled Castes, further adding to its challenges.
Despite the recent decline, Zomato’s shares have gained over 14% since the start of May, reflecting the company’s overall positive performance in the market.
