The Capital Quest | Uber leaves Zomato with a quarter of the maximum value of the $1.5 billion stake

Global ride-sharing company Uber has left Zomato Ltd, just over two years after selling its food delivery business in India to the Mumbai-listed company in an all-stock deal.

Uber, which was Zomato’s second largest shareholder, sold its 7.78% stake in the company via secondary market transactions for Rs 3,088 crore ($390 million).

He had sold Uber Eats to Zomato in January 2020 through an equity deal that then gave him nearly 10% of the company’s capital. The deal then valued Zomato at just under $2 billion, effectively valuing Uber Eats at around $200 million.

Uber has now left Zomato with 2.24 times its initial value in 2.5 years. In dollar terms, the yield is slightly less than 2x given the steep depreciation of the Indian currency against the greenback since then.

That said, Uber’s stake in Zomato was once valued at around $1.5 billion. Zomato’s share price skyrocketed shortly after listing, peaking last November. It was in line with Indian stock indices also testing all-time highs during this period.

However, the sharp correction in global tech stocks has also had a profound impact on Indian startups, particularly in the listed space where recently listed tech companies have seen the bulls lose their grip.

As Zomato’s one-year stock lock after last July’s IPO ended, it saw another bout of selling pressure at its lowest last week. It has rebounded since then, especially after the announcement of the first quarter results, but it is still at a third of the value it once commanded.

For the first quarter ended June 30, Zomato recorded a strong increase in revenue to Rs 1,414 crore from Rs 844.4 crore a year ago. Its net loss was halved to Rs 186 crore over the same period.

Last week, a pre-IPO investor also left Zomato. However, unlike Uber, he signed with a loss.

Moore Strategic Ventures exited by selling its entire 0.5% stake on the stock market. The investment firm had purchased the stake from Nexus Venture Partners through a secondary transaction in December 2020 for Rs 190.5 crore. The dollar loss would be slightly higher as the rupee has depreciated since the investment.

Moore Strategic Ventures is said to be one of the first known institutional investors to back Zomato before it went public to exit the company.

Prior to the IPO, Zomato had secured Rs 4,196.52 crore from around 130 core investors including many of its existing private and venture capital backers. These included Tiger Global, Canada Pension Plan Investment Board, Singapore sovereign wealth fund GIC and Abu Dhabi Investment Authority.

The company had filed for an IPO in April 2021 to raise up to Rs 8,250 crore ($1.1 billion then). The IPO plan initially included a new issue of shares worth Rs 7,500 crore and a sale of shares worth Rs 750 crore by Info Edge, the company behind the job portal Naukri.com and the real estate classifieds website 99acres.com. However, Info Edge later reduced its sale offer to Rs 375 crore while Zomato increased the size of the fresh offer.

Carol N. Valencia