In a strategic move, SoftBank’s fund, SVF Growth (Singapore) Pte. Ltd, is set to divest at least a 1.1% stake in Zomato Ltd, the popular food-delivery and restaurant-discovery platform. The stake sale, worth around ₹1,020 crore, is scheduled for October 20, marking a significant step in SoftBank’s plan to exit the food delivery business.
Zomato, co-founded by Deepinder Goyal, has experienced an astonishing 80% surge in its stock price over the past year, climbing from ₹62.05 to ₹111.65. This remarkable growth can be attributed to the escalating momentum in the food delivery sector, driven by events like the ongoing Cricket World Cup and festive seasons.
The ongoing Cricket World Cup in 2023 is expected to provide a substantial boost to food aggregators’ delivery volumes. This boost is likely to result in better growth rates over the medium term, as suggested by market experts.
In light of Zomato’s performance and market conditions, Elara Capital has reiterated a “BUY” rating on the company’s stock, with a raised target price of ₹140, up from ₹130 earlier. This indicates a favorable outlook for Zomato’s future prospects.
The online food delivery sector has witnessed a significant increase in take rates, rising from 5.5% in 2015 to approximately 24-25% in the context of cloud kitchens. This shift is not necessarily tied to the average order value (AOV) and reflects the evolving dynamics of the industry.
According to a term sheet, SoftBank, through SVF Growth, will sell Zomato’s shares at an offer price ranging from ₹109.4 to ₹111.65 per share. It’s worth noting that SoftBank may offer a maximum 2% discount to the current market price while selling its stake in Zomato.
Upon completing this stake sale, SoftBank will retain a 1.15% stake in Zomato, which is also expected to be sold in the coming weeks. This marks a significant shift in SoftBank’s investment portfolio.
As of June 30, SVF Growth held a 3.42% stake in Zomato, subject to a 12-month lock-in following Blinkit’s acquisition, which concluded on August 25. The transfer of this stake from SoftBank to Zomato was related to Zomato’s acquisition of the quick commerce company in 2022.
Notably, on August 30, 2023, SoftBank’s SVF Growth (Singapore) Pte. Ltd sold a 1.17% stake in Zomato for ₹940 crore ($114 million). This followed similar stake sales by other investors in Zomato, including Tiger Global-backed Internet Fund III Pte Ltd.
During these stake sales by offshore investors, several prominent companies and funds, including Axis Mutual Fund, SBI Life Insurance Co., ICICI Prudential Life Insurance, Founders Collective Fund, Morgan Stanley Asia Singapore, and Societe Generale, acquired shares of the food delivery company.
