On a day when shares of Zomato Ltd jumped 20% to hit the upper circuit following its Q1 earnings, a large shareholder of the company has put up shares worth as much as $373 million on sale through a block deal, according to deal terms seen by Mint.
American ride sharing company Uber is the likely seller of the Zomato shares, a person aware of the development said, speaking on the condition of anonymity.
The shareholder, whose name was not disclosed in the deal terms, is selling 612 million shares representing 7.8% shareholding in Zomato in a price range of Rs48 – Rs54 per share, a 2.8% - 13.6% discount to Rs55.55 per share closing price of the stock on Tuesday, as per the deal terms. Shares will be sold to institutional investors.
This will result in an overall deal size of Rs2,938 crore or $373 million. Bank of America is the sole broker on the block trade.
An email sent to Uber did not elicit a response till press time.
Uber B.V held 612.19 million shares in Zomato, representing 7.78% shareholding, as of 30 June, data from BSE shows. Uber is the second biggest single shareholder in Zomato after Info Edge. The block trade will result in a complete exit for Uber.
Uber was allotted shares in Zomato following the latter’s acquisition of Uber Eats’ India business in January 2020, filings by Zomato show.
The block trade comes after the 12-month lock-in for pre-IPO shareholders of Zomato ended on 23 July.
On Tuesday, shares of Zomato hit the upper circuit for the first time since listing after it narrowed its losses in the first quarter of FY23. The share closed at the upper circuit of Rs 55.55, up 19.98% from its previous close, amid year high delivery and traded volumes of 19.67 crore shares and 53 crore shares respectively.
The company posted a loss of Rs 186 crore in Q1 FY23, below the Rs 360 -odd crore loss reported sequentially and a year ago. Zomato listed amid much fanfare on 23 July 2021, closing almost 66% above its issue price of Rs 76 apiece. However, plagued by high losses in the March quarter, the share began trading below its issue price since 28 April this year.
Certain market participants said the high delivery volume posted on the counter could be in anticipation of the likely block deal.
“It’s possible that huge delivery could have been taken on anticipation of a rumoured block deal , but if that turns out true the counter could remain volatile ,” said Rajesh Palviya, technical head at Axis Securities.
JP Morgan has an overweight rating on the stock with a price target of Rs 115, implying a 107% upside from its 2 August closing price. The investment bank said in its June 27 report that its price target is based on a discounted cash flow valuation with a weighted average cost of capital of 13.3% that implies a 1.5 times EV/Gross order value and nine times EV/adjusted revenue multiple for the food delivery business and 1X EV/GOV for instant grocery startup Blinkit.