New Delhi: The shares of Zomato Ltd, a prominent online food delivery company, following reports indicating that Alipay, the Chinese payments group, is considering selling its entire 3.44% stake in the publicly listed company for approximately $400 million (or Rs 3,331.60 crore at a rupee-dollar exchange rate of 83.29) through block deals.
According to data from BSE, Alipay Singapore Holding Pte Ltd held 29,60,73,993 shares, representing a 3.44% stake (equivalent to 3.5% voting rights) as of the end of the September quarter. Hello Entrepreneurs, citing a term sheet, suggests that the block deals are likely to be transacted at Rs 111.28 per share, a 2.2% discount to Zomato’s closing price of Rs 113.80 on Tuesday. In October, SoftBank had previously sold a 1.1% stake in Zomato for about Rs 1,040 crore. Zomato’s shares have surged by 88% year-to-date.
Bank of America and Morgan Stanley are reportedly the advisers for the deal, expected to be executed later this week on Indian exchanges, as per reports.
During the JM Financial India Conference 2023, Zomato shared vital insights, emphasizing a 4-5% EBITDA as a percentage of gross order value (GOV) as the sustainable margin for the business. The company acknowledged a slower margin expansion in the September quarter due to a substantial rise in fixed costs but expressed confidence in achieving the sustainable margin target over the medium term, citing revenue and cost-side levers.
Notably, Blinkit, acquired by Zomato five quarters ago, has experienced consistent adoption in cities where Blinkit and Zomato’s food delivery business overlap; Blinkit’s GOV accounted for 47% of Zomato’s GOV in those cities in 2QFY24. Zomato anticipates strong adoption trends in the near to medium term due to significant under-penetration, according to insights from JM Financial.
In a recent research report, domestic brokerage Motilal Oswal Financial expressed a positive outlook on Zomato’s long-term growth prospects and did not foresee intensified competition despite the entry of ONDC into the space. The brokerage reiterated its Buy rating on Zomato, setting a target price of ₹135.