What the exit of Uber Holdings could mean for Zomato stock

On Tuesday, the markets were already rife with reports that Uber Technologies, the holding company of Uber, would be selling its stake in Zomato. Incidentally, Uber Technologies held a whopping 7.8% stake in Zomato and on Wednesday it managed to exit the entire 7.8% stake in Zomato, the Indian food delivery company. The total stake sale in Zomato Ltd by Uber Technologies was worth $392 million and it was executed via a block deal on the stock exchanges. Bank of America Securities was the arranger for the sale deal in Zomato.

While there was no official confirmation either from Uber or from Zomato, the market reports indicate that the Zomato block deal was executed at a price of Rs50.44 per share and the entire 7.8% stake held by Uber Technologies was liquidated. The total size of the deal was 61.2 crore shares as per the term sheet. This makes the total deal worth Rs3,087 crore or approximately $392 million. The deal had its impact on the price and volume details of Zomato as evidenced on the stock exchanges.

On the 03rd of August, Zomato witnessed a total of 59.90 crore shares change hands on the NSE taking the total volumes for the day to Rs3,265 crore. On the BSE, Zomato witnessed a total of 71.78 crore shares change hands for a total value of Rs3,660 crore. It is evident that bulk of the block trade in Zomato was executed on the BSE, since these are unprecedented volumes on the stock. In terms of number of shares traded and in terms of the value of shares traded, Zomato was the top ranked stock on the NSE and also on the BSE.

That brings us to the million dollar question of who were the buyers. While there are no confirmations and most buyers have been cagey about talking about the demand, it is reported that the stake was purchased by around 20 global and Indian funds. This included such marquee names like Fidelity, Franklin Templeton and ICICI Prudential Mutual Fund. The buying interest was evident from the fact that although the deal happened close to Rs50 per share, the price of Zomato closed on the bourses above Rs55 per share, showing strength.

During the day, the shares of Zomato fell up to 6.8% in what could be the sharpest and steepest drop in the last one week. On Tuesday, Zomato had closed locked in the upper circuit of 20%. However, the stock did recovery later during the afternoon trades and at the close of trading the buyers on the counter were substantially higher than the sellers on the counter. The stock did closer in the red, which was expected on the day of a big block deal, but the good thing is that almost the entire losses of the morning were recovered.

For the quarter ended June 2022, Zomato did report rather flattering numbers. Its net loss had narrowed in the June 2022 quarter to Rs186 crore compared to Rs356 crore in the June 2021 quarter. The narrowing of loss came from lower cash burn and higher top line. Despite competition from Swiggy, Zomato still managed to show good traction in terms of Gross Order Value (GOV), an important metrics to measure the top line of service oriented companies in the digital space.