Massive ₹5,438.50 Crore Shakeup: Is Zomato About to Lose Its Biggest Backer?

On August 20, a block deal involving shares of the food aggregator Zomato worth ₹5,438.50 crore was executed, with the deal size later being increased. Antfin Singapore Holding, a subsidiary of Alibaba Group, is believed to be the seller in this transaction.

In total, 21 crore shares, equivalent to a 2.4% stake in the online food delivery service, were traded in the block deal. The shares were sold at a floor price of ₹258 each, which is approximately a 2% discount compared to the stock's last closing price.

Following the transaction, Zomato shares reacted sharply, dropping over 1%. By 09:21 AM IST, the shares were trading at ₹259.20 on the NSE.

Stock exchange data indicated that as of the end of the June quarter, Antfin Singapore Holding Pte held 37,38,55,225 shares, representing a 4.3% stake in Zomato. Earlier in March of this year, Antfin sold a 2.1% stake in Zomato through block deals at a price of about ₹160 per share, totaling $341.50 million. At the end of December 2023, Antfin held a 6.42% stake in the company.

In November 2023, Alipay, another Chinese entity, fully exited Zomato by selling its entire 3.44% stake in the Indian food delivery platform.

Zomato shares reached a record high of ₹280 on Monday. Foreign brokerage UBS has continued its 'Buy' recommendation on Zomato, raising its target price to ₹320 from the previous ₹260. Similarly, Morgan Stanley last week maintained an 'Overweight' rating with a target price of ₹278.

Although the exact details of the parties involved in the transaction were not immediately confirmed, CNBC-TV18 reported on August 19 that Antfin Singapore Holding was planning to sell a 2% stake in Zomato, estimating its valuation at $556 million (₹4,650 crore). Initially, reports suggested that Antfin was planning to offload 1.54% shares worth $408 million.

According to the latest shareholding data from Zomato, Antfin Singapore Holding owns a 4.3% stake in the company. The stake sale will trigger a 90-day lock-in period, preventing Antfin from executing another equity sale during this time.

This stake sale follows Zomato's recent quarterly earnings report, where the company reported a significant increase in net profit, rising 126.5 times to ₹253 crore for the April-June quarter compared to the same period the previous year. The surge in profits was attributed to higher platform fees charged to consumers and improved operational profitability in its quick commerce division, Blinkit.

Additionally, Zomato's strong quarterly performance and promising growth outlook, especially in quick commerce, have led to optimistic price targets from analysts, with shares climbing approximately 20% in the past month alone.

The stock has also proven to be highly profitable for investors, delivering returns of 112% year-to-date and nearly 200% over the past year. Some brokerages, including CLSA and UBS Securities, predict that the stock could surpass the ₹300-mark within the next 12 months, potentially providing further returns.

On March 6, 2024, Antfin Singapore sold 176.4 million shares of Zomato on the BSE at an average price of ₹160.26 per share. Out of this total, Morgan Stanley Asia (Singapore) Pte. acquired 56.81 million shares.

Zomato operates a B2C technology platform that offers customers an efficient, on-demand service to search for and discover local restaurants, order food, and have it delivered swiftly. Additionally, Blinkit, a subsidiary of the company, is a quick commerce marketplace that provides on-demand delivery of thousands of products across various categories in under 15 minutes.

In its FY24 annual report, Zomato stated, "Our Going-out and B2B supplies business (Hyperpure) are still in the early stages of market penetration and growth. We anticipate achieving similar Adjusted EBITDA margins in these businesses over the long term." The company also noted that it has been profitable from FY24 onwards and continues to focus on expanding its four key business segments while maintaining an emphasis on both growth and overall profitability.