Zomato shares jump 2% amid buzz over stake sale by SoftBank

Shares of Zomato rose over 2% in opening trade on Friday despite a report that Japanese tech giant Softbank is looking to sell half of its residual stake in the online food delivery platform. SoftBank, which holds 2.22% shares in Zomato through its entity SVF Growth (Singapore) Pte, plans to exit from the food delivery business.

As per the report, SoftBank is looking to sell around 1.1% stake worth ₹1,000 crore in Zomato via the block deal route. The floor price for the deal is expected to be in the range of ₹109.4 to ₹111.65 per share, which could be either no discount or 2% lower than Thursday's closing price of ₹111.7 apiece on the BSE.

Earlier in August this year, another pre-IPO investor U.S.-based hedge fund Tiger Global exited Zomato by selling its remaining 1.44% stake in the company at an average price of ₹91.01 per share. Tiger Global, through its investment vehicle Internet Fund IV, owned a 5.11% stake in Zomato before the foodtech unicorn launched its IPO in July 2021. In August 2022, Tiger Global diluted around 18 crore shares in the restaurant aggregator and reduced its shareholding in the company to 2.77%, following the end of the lock-in period for pre-IPO investors.

Snapping two sessions of losing streak, Zomato shares opened at ₹113.50, up 1.6% against the previous closing price of ₹111.70 on the BSE. In the early trade, the foodtech stock gained as much as 2.4% to ₹114.35, while the market capitalisation climbed to ₹96,972 crore.

The stock hit a fresh 52-week high of ₹115 on October 18, 2023, rebounding from its 52-week low of ₹44.35 on January 25, 2023, delivering a solid return of around 160%. Overall, the stock has delivered a negative return of 10% since its listing on the stock exchanges in July 2021 as the homegrown food company had a forgettable first year, post market debut.

The share price of Zomato has witnessed a strong rally in the recent past as analysts turn bullish on the stock, expecting the online food delivery platform to see a rise in orders and restaurant partnerships during the ICC World Cup as well as the festive season. Zomato shares have risen nearly 47% in the past three months and more than doubled in the last six months. The largecap stock has risen around 84% in a year and 92% in the calendar year 2023. In the past one month, it has added over 12%.

The regained momentum in Zomato shares can be also attributed to improvement in the financial performance. The Deepinder Goyal-founded company turned profitable for the first time during the June quarter of this fiscal, driven by operational improvement in the food business. The food delivery company posted net profit of ₹2 crore in the first quarter of FY24 compared to a loss of ₹186 crore in the year-ago period. Revenue from operations soared 71% year-on-year to ₹2,416 crore during the April-June quarter of the current fiscal as against ₹1,414 crore in the corresponding quarter of the previous year.

Revenue from its business-to-business subsidiary Hyperpure grew 126% year-on-year to ₹617 crore in Q1 FY24, driven by growth across Zomato’s core restaurant supplies business as well as the newer quick commerce opportunity that it started tapping a couple of quarters ago. The company’s dining-out business also showed improvement by posting ₹515 crore of GOV through dining-out in India, which was around 7% of the GOV Zomato’s food delivery business during the same quarter.

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