Uber Gets 2X Return On Zomato Exit; Sells shares for $392 Mn


Uber, the industry leader in ride-hailing, has left Zomato while effectively increasing its return. Using a block sale of 612 million shares in a deal for $392 million, it left the major food delivery company Zomato (INR 3,095 Cr). 

At INR 50.44 per share, the Zomato block deal was carried out. Requests for comments from Zomato and Uber were not immediately answered. For $200 million in 2020, Uber purchased a 9.99 percent share in Zomato. 

Around 20 new investors, including Fidelity, Franklin Templeton, and ICICI Prudential, purchased the shares from Uber.

On Wednesday, shares of Zomato Ltd. dropped as much as 6.8%, marking the worst decline in over a week. By 0614 GMT, the stock had partially reversed its decline and was down 2.6 percent.

A few days before Uber’s sale, Moore Strategic Ventures sold 42.5 million shares of the food delivery startup at a value of INR 44 each. Moore made this decision after insider investors’ one-year lock-in period expired and Zomato’s share price fell to an all-time low of INR 40.55 per share.

On August 3, the shares of the food-tech company were selling for INR 53.75 each, down 3.24 percent from the previous day’s close. On Tuesday, August 2, Zomato’s shares increased as the publicly listed food-tech business revealed a successful Q1 FY23 performance.

Zomato was able to cut its losses in half from the INR 360 Cr it recorded in the same quarter last year, to INR 186 Cr in Q1 FY23. However, at the same time, its costs soared by 40% year over year, reaching INR 1,767.7 Cr for the June quarter.

The food tech startup’s food delivery business broke even on an adjusted EBITDA basis in the June quarter, which primarily drove its share price up. Yesterday (August 2’22), after soaring by more than 20% in a single day, Zomato’s shares reached an all-time high.

On July 23, 2021, the Deepinder Goyal-led business had its stock market debut, with a first-day closing price of INR 125.20 per share. A 53 percent gain above the IPO price of INR 76 per share, the company’s shares were listed at INR 116 each.

Zomato has since struggled on the stock market, and as a result, its current share price is 58 percent less than it was on the opening day of trade. Uber has increased the amount it invested in the food-tech business, demonstrating that although major investors are gaining profits, smaller investors are seeing their wealth destroyed.

Zomato hasn’t exactly portrayed itself in the best light when it comes to investors in other areas either. Investors had to complain in writing to SEBI about how the information about the Blinkit purchase came so late.

Even after there was widespread suspicion that the purchase had been completed, Zomato did not confirm or refute the news, which caused the share price to fall and caused losses for individual investors.

Furthermore, issues with Zomato’s capital burn and valuation have eroded investor faith in the publicly listed firm, which continues to harm its share price and ultimately results in losses for retail investors.

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