Tiger Global Fully Exits Zomato, Sells 1.4% Stake

US-based investment giant Tiger Global, through its venture capital fund Internet Fund III Pte Ltd, has successfully completed its exit from the online food delivery platform, Zomato. This strategic divestment involved the sale of Tiger Global's entire shareholding in Zomato, totaling a substantial consideration of ₹1,123.85 crore. The sale comprised approximately 12.35 crore shares in the company, with an average selling price of ₹91.01 per share.

Tiger Global's exit from Zomato signifies the conclusion of a noteworthy investment journey with the prominent player in India's food delivery and restaurant discovery market. The investment firm, known for its long-standing support of Zomato, made a strategic decision to monetize its holdings in the online food delivery platform.

In a broader context, this transaction underscores the changing dynamics and strategies within the investment landscape, particularly in the tech and food delivery sectors.

Participants in the Share Sale

Tiger Global's exit was not the sole notable divestment in this transaction. DST Global, through its investment vehicle Apolleto Asia Ltd, also participated by divesting approximately 3.2 crore shares in Zomato, realizing a transaction value of ₹288 crore at an average price of ₹90.10 per share.

Tiger Global's journey as an investor in Zomato has been a long and impactful one. At the close of the June quarter, the investment firm held a 1.44% stake in Zomato, as indicated by shareholding data with the BSE. This stake was reduced in August 2022 when Tiger Global sold over 18.45 crore shares in the open market, effectively reducing its holding to 2.77%.

Before this recent sale, Tiger Global's Internet Fund VI Pte had a holding of 5.11% in the online food delivery platform, reflecting the firm's substantial and influential presence within Zomato.

Zomato's Remarkable Profitability and Growth

Zomato, a key player in India's competitive food delivery market, achieved a significant milestone by turning profitable during the June quarter of this fiscal year. This remarkable turnaround in profitability can be attributed to substantial operational improvements in the company's food business. Notably, Zomato's food delivery margins surged to 13.6%.

During the first quarter of the fiscal year, Zomato reported a consolidated net profit of ₹2 crore, marking a significant shift from the net loss of ₹186 crore recorded in the corresponding period of the previous fiscal year. The company's consolidated revenue from operations also exhibited impressive growth, surging by 71% year-on-year to reach ₹2,416 crore, compared to ₹1,414 crore in the corresponding quarter of the preceding fiscal year.

In a recent update, Zomato has implemented a platform fee of ₹2 per order for certain users, while in some tier-II cities, this fee has been raised to ₹3 per order. Notably, Zomato Gold subscribers, who were previously exempt from such charges, are also affected by this change.

Zomato's stock has experienced significant growth, surging by over 50% within the current year. Morgan Stanley, a prominent global brokerage firm, maintains a positive outlook on Zomato, assigning it an 'overweight' rating along with a target share price of ₹115. According to the firm's analysis, Zomato's approach to platform fees has the potential to enhance profitability significantly.

In summary, Tiger Global's exit from Zomato, along with DST Global's participation, marks a significant development in the investment landscape. Zomato's journey towards profitability and its continued growth in the competitive food delivery market are key highlights of this transaction. This strategic divestment reflects evolving investment strategies in the tech and food delivery sectors, setting the stage for further developments in the industry.

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