Crucial Period Ahead for Zomato Investors - Are Anchor Investors Chasing a Quick Exit?

Published on 19 Aug, 2021

Zomato's stock price may dip sharply as the lock-in period for Anchor investors, some of whom have deviated from their mandate, nears expiry.

Zomato had a stellar listing on the Indian bourses providing a return of over 80% to IPO investors. While the IPO was priced at INR 76 a share, the stock price opened at a much higher INR 115 on the listing date (i.e., 23 July 2021). It rallied further to INR 140 in the very next trading session. The stock price ranged between INR 125 and INR 150 over the last few trading sessions.

The rally in the stock price was expected as the IPO created much fanfare before its launch. The issue was subscribed 38 times with strong support from Anchor investors, including top fund houses across the globe. Of the total issue of INR 9,375 crore, almost 45% (INR 4,196.5 crore) was raised through Anchor investors.

While the stock price has been rangebound over the last few trading sessions, it will be interesting to see its movement over the next month. Retail investors should be aware that as per SEBI regulations, Anchor investors have a lock-in period of 30 days from the date of allotment of shares.

Consider an example wherein SBI Cards' stock declined 15% on completion of the lock-in period due to a stock sale by Anchor investors.


The arrow in the image above represents the discounted listing of SBI Cards: On the listing date, SBI Cards opened at a discount of 13% to the issue price.

The blue box in the image above represents the selloff by Anchor Investors: On completion of the Anchor investor lock-in period of 30 days, the stock declined almost 15% in one day as Anchor investors exited the stock.

The issue price of SBI Cards was INR 755 per share and the issue was subscribed 26 times the original ask. However, the stock opened at INR 658 on 16 March 2020, representing a discount of 13% on its issue price. The discount listing was due to WHO’s declaration of the outbreak of COVID-19 as a pandemic on 11 March 2020, which triggered global selling in equity markets. Following listing, the stock price recovered to the issue price, but recovery did not sustain.

While NIFTY fell almost 3,700 points (or ~33%) in March 2020, SBI Cards' stock price was rather resilient after the discounted opening and was trading in a range. However, as NIFTY recovered over 1,400 points (or ~19%) by 15 April 2020 from its low in March, SBI Cards’ stock price closed at INR 510 (~33% below its issue price) on the same date. The stock price fell over INR 80 in just one trading session due a sell-off by Anchor investors.

As the lock-in period of Anchor investors of Zomato nears completion, it is unclear if the stock price will see the same fate as SBI Cards. The likelihood of a sell-off by Zomato’s Anchor investors is extremely high considering their strategies and mandates.

Zomato raised INR 4,196.51 crore from 186 Anchor investors across the globe. Anchor investors include global private equity firms; governments and sovereign funds; arbitrage funds; small-cap, midcap, large-, and multi-cap funds; dividend yield funds; insurance companies; pension funds; and hybrid debt funds among others. Following is the link to the list of all Anchor investors: BSE Notice – Zomato Anchor Investors.

Some Anchor investors and their mandates

Anchor Investor

Amount Invested (INR crore)

Investment Mandate

SBI Debt Hybrid Fund


To provide the investors an opportunity to invest primarily in debt and money market instruments and secondarily in equity and equity related instruments.

UTI Transportation and Logistic Fund


To provide the investors an opportunity to capitalize from growth opportunities of automobile, auto OEMs & logistics industries in India which are closely linked to rising income levels and improving aspirations

HDFC Small Cap Fund


To provide long-term capital appreciation by investing predominantly in Small-cap companies*.

ICICI Prudential Dividend Yield Fund


To provide medium to long term capital gains and/or dividend distributions by predominantly in a well-diversified portfolio of Equity and Equity related instruments of dividend yielding companies

BNP Paribas Arbitrage – ODI


To generate income and capital appreciation by investing in a combination of diversified portfolio of equity and equity related instruments, including use of equity derivatives strategies and arbitrage opportunities with exposure in debt and fixed income instruments

Aditya Birla Sun Life Mid Cap Fund


To achieve long term growth of capital at controlled level of risk by investing primarily in ‘Mid-Cap’ Stocks*

*Small-cap companies have market capitalisation of less than INR 5,000 crore. Mid-cap companies have market capitalisation between INR 5,000 and INR 20,000 crore. Zomato’s market cap is over INR 1 lakh crore.

It is surprising that arbitrage funds, small-cap funds, mid-cap funds, dividend yield funds and hybrid debt funds invest in Zomato, a loss-making large-cap company. They have deviated from their mandate to benefit from the IPO of the overly hyped food delivery leader in India. Most of these funds have traditionally invested in profitable companies. Last week, the Company published its results – a sizable consolidated loss of INR 356 crore in Q1. It is expected to be loss making in the foreseeable future and the path to profitability is still uncertain. These funds are likely to book profits and revert to their mandates once their lock-in period expires.