Big Zomato investor to offload $373 mn shares

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    MUMBAI : A large Zomato Ltd shareholder, likely Uber, has put up shares worth at least $373 million for sale through a block deal, according to deal terms seen by Mint, even as the food aggregator’s shares surged the maximum daily limit of 20% on Tuesday.

    The shareholder, whose name was not disclosed in the deal terms, is selling 612.2 million shares representing 7.8% shareholding in Zomato at a price range of 48-54 per share, a 2.8-13.6% discount to the 55.55 closing price of the stock on Tuesday, according to the deal terms. The shares will be sold to institutional investors.

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    The value of the sale will be 2,938 crore ($373 million) at the lower end of the range. At the top end, the deal size will be 3,305 crore. Bank of America will manage the sale for the seller.

    American ride sharing company Uber is the likely seller of the Zomato shares, a person aware of the development said on the condition of anonymity.

    Uber BV held 612.2 million shares of Zomato, representing 7.78% shareholding, as of 30 June, data from BSE shows. Uber is the second-biggest shareholder in Zomato after Info Edge (India) Ltd. The block trade will result in a complete exit for Uber.

    Uber was allotted shares in Zomato following the latter’s acquisition of Uber Eats’ India business in January 2020, filings by Zomato show.

    According to Mint’s analysis of Zomato’s IPO prospectus, shares were allotted to Uber at 22.47 apiece. Thus, Uber will be selling its shares at a profit, despite Zomato stock trading below its IPO price of 76 per share.

    The block trade comes after the 12-month lock-in for pre-IPO shareholders of Zomato ended on 23 July.

    An email sent to Uber did not elicit a response till press time.

    On Tuesday, shares of Zomato hit the upper circuit for the first time since listing after it narrowed its losses in the June quarter. The share closed at the upper circuit of 55.55, up 20% from its previous close.

    The company halved its loss to 186 crore in the June quarter from the preceding three months and the year-ago quarter.

    Zomato was listed on 23 July 2021, closing almost 66% above its issue price of 76 apiece on debut. However, the shares began trading below the issue price since 28 April as investors soured on money-losing internet companies.

    Analysts said the high delivery volume seen on Tuesday could be in anticipation of a likely block deal.

    “It’s possible that huge delivery could have been taken on anticipation of a rumoured block deal, but if that turns out to be true, the counter could remain volatile,” said Rajesh Palviya, technical head at Axis Securities.

    JP Morgan has an overweight rating on the stock, with a price target of 115, implying a 107% upside from Tuesday’s closing price.

    The investment bank said in its 27 June note to clients that its price target is based on a discounted cash flow valuation with the weighted average cost of capital at 13.3%.

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