While Tiger Global, Ant Financial, and SoftBank have divested their holdings in Zomato, large sovereign investors from regions like Kuwait and Singapore have increased their stakes in the food delivery company, resulting in a surge of up to 160% in its stock price over the past year.
In August, the New York-based Tiger Global sold its remaining 1.44% stake in Zomato, making a full exit from the company. Masayoshi Son-led SoftBank followed in December, selling off its remaining stake in the Gurugram-based firm.
The Japanese investor divested its entire stake in Zomato for approximately $340 million, surpassing the $300 million investment it initially made in Blinkit, a company later acquired by Zomato.
Continue Exploring: SoftBank sells off 9.35 Crore shares of Zomato in block deal worth INR 1,127 Crore
In August 2022, Zomato issued new equity shares to the selling shareholders of the quick-commerce platform Blinkit as part of the acquisition deal. Subsequent to the transaction, Zomato negotiated a 12-month lock-in period for these shares, surpassing the statutory requirement of six months. Tiger Global and SoftBank were among the investors who acquired stakes in Zomato through their holdings in Blinkit.
Meanwhile, during the September quarter, Kuwait Investment Authority acquired 88 million shares in Zomato, and later augmented its stake by purchasing an additional 6.7 million shares in the October-December quarter, as per data obtained from the company’s shareholding pattern on the BSE.
Similarly, the sovereign wealth fund of the city-state, Temasek, already owned 169 million shares, representing around a 1.9% stake in Zomato.
Nevertheless, the Canada Pension Plan Investment Board (CPPIB) slightly decreased its stake in Zomato over the recent quarters.
Global brokerages have adjusted their investment outlook on Zomato, anticipating that the company’s upcoming phase of growth will stem from Blinkit.
“We believe food value is well captured in the current stock price, and further upside will largely be driven by the quick-commerce business. We now also expect profitability improvement to be gradual in the near-term and hence market focus will be on quick-commerce growth,” HSBC Global Research said in a note.
On January 5, it was reported that Zomato chose to maintain a separation between Blinkit and its food-delivery business, temporarily halting the integration with the main platform. The focus has shifted to developing the two verticals as distinct brands.
Continue Exploring: Zomato halts Blinkit integration, prioritizes development of super brands
Alongside sovereign funds, domestic mutual funds have augmented their holdings in Zomato, aligning with the prevailing trend of this investor category bolstering investments in emerging companies. As of December 31, mutual funds raised their ownership in the company from 10.56% to 12.34% over the preceding three months and from 5.72% by December 31, 2022.
Mutual funds have extended their investments to encompass other new-age firms like PB Fintech, the parent company of Policybazaar, Delhivery, Paytm, and Nykaa. Observers of the market attribute this shift to the 2022 correction witnessed in the stocks of these enterprises, coupled with divestments by foreign investors.
As per a report from ET on January 13, domestic investors have increased their ownership in One 97 Communications Ltd, the parent company of the financial services player Paytm, while SoftBank, one of its major investors, reduced its stake. Mutual funds held 4.99% in Paytm as of December 31, rising from 2.79% in the previous quarter. Concurrently, domestic retail investors in the payments company also elevated their stake to 12.85%, up from 8.73%.
PB Fintech, the parent company of Policybazaar that experienced a complete exit from SoftBank, witnessed heightened attention from mutual funds. As of December 31, domestic mutual funds escalated their holdings in PB Fintech to 10.28%, compared to 7.83% at the end of September.
By divesting its entire investment in PB Fintech for approximately $650 million, SoftBank achieved a remarkable 3.25-times return on its initial investment of around $200 million.
Similarly, mutual funds have amassed shares in the new-age logistics firm Delhivery and the omnichannel beauty and personal care retailer Nykaa, augmenting their stakes in the December quarter.