Zomato Shy Of Rs 100, Stock Zooms 5% After 10 Crore Shares Exchanged Hands; SoftBank May Have Sold Stake

Bulls raced the share price of leading online food delivery app, Zomato on Wednesday to the point it neared Rs 100 mark. This new-age firm's stock has rallied by more than 5%. The impresssive upside in Zomato comes after 10 crore equity shares in the open market exchanged hands during the first half of the session, to the tune of Rs 947 crore. It is likely that SoftBank may have sold 1.17% stake in Zomato.

On BSE, the stock traded at Rs 98.62 apiece, up by 4.2%, after hitting an intraday high of Rs 99.69 apiece. The stock was alson near its 52-week high of Rs 102.85 apiece.

At the current market price, the stock's market cap was nearly Rs 84,840 crore.

Overall, the stock rallied by 5.32% on BSE.

As per the data available on exchanges, in the first session which is 08:45 am to 09:00 am for block deals, Zomato shares witnessed a traded volume of 10 crore equity shares at Rs 94.70 apiece. The transaction is valued at Rs 947 crore.

As per reports, it is most likely that SoftBank through its unit SVF Growth may have offloaded 1.17% or 10 crore equity shares in Zomato.

As of June 30, 2023, SFV's shareholding in Zomato stood at 28,71,38,736 equity shares or 3.42%.

This would be the third block deal carried in Zomato shares. Earlier this week, Internet Fund III PTE Ltd, offloaded 12.34 crore equity shares aggregating to Rs 1,123.84 crore on August 28. While on August 3rd, UBER B.V. sold nearly 61.22 shares of Zomator for Rs 3,087.93 crore, while on the same day, Fidelity Investment Trustand ICICI Prudenial Life Insurance purchased over 5.44 crore equity shares and 4.5 crore shares respectively.

In another development, Zomato received board of directors approval for the appointment of S. R. Batliboi & Associates as its its statutory auditors to hold office from conclusion of 8th (Eighth) annual general meeting till the conclusion of its 13th (Thirteenth) annual general meeting.

Earlier this month, brokerage JM Financial had predicted of stake sale by shareholders in Zomato.

In its latest research note, JM Financial had said that Zomato's stock is likely to be volatile in the near term on account of market speculation around possible exits by some pre-IPO shareholders (VC/PE/Chinese investors) of the company as well as erstwhile shareholders of Blinkit who had received it under a share swap deal.

Interestingly, the brokerage's note dated August 18 also said, "While we cannot accurately predict when (if at all) these shareholders would want to exit, we note that several of them are already sitting on sizeable gains, albeit a large chunk of it is unrealised. A few cues from past actions of these investors suggest that at least some of them would be eager to book profits post the recent run-up in the stock. So, a sizeable proportion of Zomato's shares could be available for trade in the near term. In fact, the total value of the Zomato stock that all these investors hold basis CMP is Rs 180 billion."

Even if one were to assume that only 50% of the VC/PE/Chinese investor stake would be available for trade, the total short-term outflows could be close to Zomato's total IPO size of Rs 93.75 billion, its report said.

On the valuation, brokerage said, "We think food-techs deserve premium valuations to listed QSRs as their topline growth is likely to be 1.2x-1.5x of the latter over a sustainable period of time. The former's business model is also much more robust as growth is not dependent on capex or working capital investments. Lastly, we believe food-techs are a much more diversified play on the wider
food services industry while QSRs are a play on just one or two cuisines. Given that leading QSRs currently trade at c.33x FY25 pre-IND AS EBITDA, we believe Zomato's food delivery business alone can be valued at ~40x FY25 pre-IND AS EV/EBITDA, which works out to a target market cap of Rs 678 billion broadly in-line its current market cap (ex-cash). It effectively means the market is factoring in value attributable to food delivery business only, while giving close to zero value to Blinkit, Hyperpure and Dining-out businesses."

A target price of Rs 115 per share has been set on Zomato.

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