Zomatos stock prices rose by 5% on August 30th after a transaction involving a 1.17% ownership stake worth Rs 947 crore. There were speculations about SoftBank reducing its stake and Tiger Global’s recent divestment added to the curiosity. Zomatos commitment to profitability through platform fees and positive evaluations, from Morgan Stanley and HSBC helped strengthen investor trust.
Zomato’s shares kicked off August 30 with a strong surge, opening more than 5 percent higher. This boost followed a block deal on the stock market involving 1.17 percent of the company’s equity. A noteworthy 10 crore shares, equivalent to a 1.17 percent stake, changed hands at an average floor price of Rs 94.70 per share.
This substantial transaction amounted to a total deal value of approximately Rs 947 crore.
As the clock struck 09.48 am, Zomato‘s shares were trading at Rs 98.05 on the NSE, reflecting a 3.54 percent increase compared to the previous closing price.
While the specific parties engaged in the deal remained undisclosed initially, media reports had previously suggested that SoftBank was considering reducing its stake in Zomato. SoftBank’s stake of 1.17 percent was held through its venture capital fund, SoftBank Vision Fund. Notably, SoftBank holds a total stake of 3.35 percent in Zomato, a portion of which was acquired during the Blinkit deal, with the lock-in period for that stake concluding on August 25.
This recent stake sale occurred in close proximity to another significant development in Zomato’s ownership landscape. On August 28, foreign institutional investor Tiger Global Management made headlines by divesting its entire shareholding of 1.44 percent in Zomato, yielding a substantial Rs 1,123.85 crore from the deal.
On the operational front, Zomato has been diligently enhancing its focus on profitability. The company decided to introduce a platform fee of Rs 2, applicable regardless of the total value of items in the shopping cart. This strategic move contributed to Zomato achieving its first-ever profit after tax of Rs 2 crore during the April-June period.
Leading foreign brokerage firm Morgan Stanley, maintaining an ‘overweight’ rating on Zomato with a target price of Rs 115, viewed the introduction of the platform fee as a positive stride. The firm expressed that Zomato’s commitment to this fee structure could significantly boost its profitability.
In a similar vein, HSBC upped its price target for Zomato by nearly 18 percent, setting it at Rs 120, while reiterating its ‘buy’ recommendation. HSBC emphasized Zomato’s exploration of hyperlocal domains, expressing conviction in the long-term value of its subsidiary Blinkit, currently valued at $5 billion. HSBC’s outlook underscores hyperlocal operations as a potentially significant growth avenue for Zomato in the foreseeable future.
