Zomato drops 4% following a Rs 3,112-crore block deal, possibly by an Ant Group subsidiary

Zomato shares dropped 4% in early trading on March 6, following a Rs 3,112-crore block deal where approximately 19 crore shares, representing a 2.1% stake, were exchanged. The shares were purchased at an average price of Rs 160 each, reflecting a 3.5% discount from the previous closing price.

At 09:20 am, Zomato shares were trading at Rs 160.80 on the NSE.

Reported on March 5 that Ant Group’s subsidiary, Antfin Singapore Holdings Pte, was planning to sell up to a 2% stake in the food delivery platform.

The floor price for the block deal was expected to be around Rs 159.4 per share, bringing the total transaction value to nearly Rs 2,800 crore, as per the report.

According to Zomato’s latest shareholding data, Antfin Singapore Holdings Pte owned a 6.42% stake, which will reduce to 4.32% after the stake sale.

The block deal occurs as sentiment for the food-delivery platform strengthens.

On March 4, the stock reached a record high due to the company’s improving profitability and robust growth outlook.

Over the past three months, the stock has surged more than 42%, making Zomato the most valuable new-age tech stock with a market capitalization of Rs 1.46 lakh crore.

In November 2023, Alipay Singapore Holding, an arm of the Chinese e-commerce giant Alibaba, sold its entire 3.44% stake in the online food delivery aggregator, totaling 29,60,73,993 shares, for Rs 3,337 crore through open market transactions.

Buyers included ICICI Prudential Life Insurance Company, Morgan Stanley, India Acorn ICAV, Société Generale, Government of Singapore, Monetary Authority of Singapore, Goldman Sachs (Singapore) Pte, Government Pension Fund Global, and Veritas Asset Management, among others.

In January of this year, Motilal Oswal Mutual Fund sold 4,50,00,000 Zomato shares in bulk deals at an average price of Rs 138.15. On Tuesday, Zomato shares closed at Rs 166.05 on the BSE, down 2.18%.

Zomato turned profit after tax positive in Q1FY24, ahead of guidance. Analysts anticipate that improving profitability in both food delivery and quick commerce sectors will continue to drive significant earnings growth.

On February 22, Jefferies stated that they value Zomato’s food delivery business at 50 times its Mar’26 Ebitda and Blinkit at 9 times March 2026 sales. This valuation represents a significant premium compared to global and regional peers. However, Jefferies believes that this premium is justified by the strong growth and improving profitability of both companies.

According to Jefferies, the duopoly market structure makes the online food delivery market more appealing. Zomato, as the market leader with a 55% share, has consistently gained market share due to superior execution.

Various factors such as consumer preference for convenience, rising income levels, a younger working-class population, increased female participation in the workforce, and incremental supply supported by the aggregator ecosystem are driving growth. Moreover, high-entry barriers, operational complexity, and scale leverage make it challenging for competitors to enter the market.

Jefferies also mentioned that Zomato has S$1.4 billion in cash, generating yield, and positive cash flow in recent quarters, including other income. They anticipate limited cash drawdown going forward, with cash levels expected to remain well above $1 billion.

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