On Wednesday, November 29, Ant Financial sold a 3.44% interest in Zomato for Rs 3,326 crore ($400 million), as per exchange statistics. The Chinese company made nearly four times the profit on its six-year wager when the shares sold for Rs 112 each.
Ant is leaving Zomato in part for the second time. When the shares of the big food delivery company were trading at Rs 63 per unit in November 2022, it sold a stake of the same size for Rs 1,631 crore ($196 million).
Ant has made around $600 million from his investment in Zomato with the most recent sale. With a current market capitalization of Rs 101,656 crore ($12.2 billion), its 6.4% stake in the company is valued at Rs 6,500 crore ($780 million).
The Chinese company paid an average of Rs 29 per share for Zomato, investing a total of Rs 3,242 crore ($390 million), according to The Arc Research. It participated in several investment rounds starting in early 2018 when Bengaluru’s Swiggy and Gurugram’s Zomato were in a fierce food delivery war.
Ant had been scheduled to invest an extra $100 million in Zomato in 2020; however, the transaction was hindered by India’s ban on Chinese funding. Due to this, Zomato expedited its plans for an initial public offering (IPO) and, in 2021, became the first Indian unicorn with a market-bound product to go public.
The Analysis
Zomato’s cap table has changed significantly in the two years since its initial public offering (IPO): it is now dominated mainly by public market investors instead of being jam-packed with venture capital and late-stage tech funds.
The lock-up period for selling shares expires in July 2022, and pre-IPO investors have collectively sold their investment in the company for around 40% less. Uber (8%), Sequoia (7%), Ant Financial (7%), and Tiger Global (7%) are the biggest among them.
This situation is typical of publicly traded startups. Many people predicted that stake sales would negatively impact Zomato’s stock price over time. From the middle of 2022 to the beginning of 2023, the price was below the Rs 76 IPO level. But since then, it has increased by more than 95% due to the meal delivery company’s focus on profitability.
Due to tensions between the two nations, Chinese firm Alibaba and its partner, Ant Financial, have reduced their presence in India. After leaving the online grocery store BigBasket in 2021, Alibaba has been reducing its ownership of the leading financial company Paytm, selling $247 million shares in August.
“Chinese companies have left the Indian market. Venture capitalists used to play the long-term “hold to maturity” game, but I believe it is over. China is a major investor in several companies in his portfolio.”They can realize gains at this price,” he continued.
After facing challenges in its native market and business restrictions, Ant has partly left Zomato. Beijing punished it $1 billion earlier this year for violating corporate governance and consumer protection laws.
Profit booking in Indian betting could lessen the suffering caused by such difficulties.
