Uber sells entire stake in Zomato; pockets Rs 3,088 cr, makes 2.4x returns

Fidelity Investment Trust Fidelity Series Emerging Markets Fund bought 54.4 mn shares worth Rs 274 cr and ICICI Prudential Life Insurance bought another Rs 226 crore, showed block deal data

American ride-hailing giant Uber, on Wednesday, sold its entire 7.78 per cent stake in domestic food-delivery company Zomato to mop up Rs 3,088 crore ($390 million). A total of 612 million shares were sold at Rs 50.44 apiece to over a dozen institutional investors. Fidelity Investments bought shares worth Rs 274 crore and ICICI Prudential Life Insurance bought another Rs 226 crore, showed block deal data.

Shares of Zomato whipsawed, hitting a low of Rs 50.25 and high of Rs 56.85, where Rs 3,662 crore worth of stock got traded. Shares finally closed at Rs 55.4, which was little change over previous day’s close of Rs 55.6.

Uber is the first major shareholder of Zomato to cash out after the one-year lock up on its pre-IPO shares ended last month. The sale comes close on heels of a 35 per cent jump in Zomato’s shares of its all-time lows of less than Rs 41 last week. BofA Securities was the sole bookrunner for the deal.

Shares of the company got a boost after it reported strong results for the June 2022-23 quarter (Q1FY23) where the management guided that it expects to achieve a break-even (ex-Blinkit) by March 2023 (outer limit: September 2024) driven by rise in take-rate and cost efficiencies.

“Improvement is not sudden or based on just a quarter's work – instead it's the effort from the past. The Blinkit loss is likely to be lower than earlier guidance,” Jefferies had observed in a note on Tuesday. The brokerage has a ‘buy’ rating on the stock with a price target of Rs 100.

Uber had acquired the stake in Zomato in January 2020 when it sold its India food-delivery business, Uber Eats, to the company in a non-cash deal. The transaction was valued at Rs 1,376 crore. While Uber’s exit price was 34 per cent below Zomato’s IPO price of Rs 76, it still made about 2.4 times gains on its implied acquisition cost.

Zomato got listed in July 2021. Post-listing, the company had hit a peak market cap of Rs 1.26 trillion ($16 billion), which has currently declined to Rs 43,655 crore ($5.5 billion).

Through its maiden share sale, Zomato had raised Rs 9,000 crore in fresh capital and only early-stage investor—Info Edge—had parted with a small portion of its stake worth Rs 375 crore in the IPO.

Zomato doesn’t have any identifiable promoter. The shareholding of its founders and all investors is part of public shareholding. Exit by large marquee investors could weigh on shares of the company, fear market watchers.

China’s Alipay and Antfin held a 7.1 per cent and a 6.99 per cent stake, respectively, in Zomato at the end of the June 2022 quarter. Info Edge’s shareholding stood at 15.17 per cent. Tiger Global’s Internet Fund held 5.11 per cent and Sequoia Capital held 5.1 per cent.