Zomato, the renowned food-delivery giant, is experiencing a remarkable resurgence fueled by the increased stakes of sovereign investors from Kuwait and Singapore. Against the backdrop of major exits by high-profile investors like Tiger Global and SoftBank, sovereign funds are injecting renewed confidence and capital into Zomato, propelling its stock price to unprecedented levels.
Major Exits Set the Stage
Tiger Global, a key player based in New York, bid adieu to its remaining 1.44% stake in Zomato in August, completing a full exit from the company. Following suit, SoftBank, led by Masayoshi Son, divested its entire holding in December, raking in approximately $340 million. This move came after SoftBank’s initial investment of $300 million in Blinkit, a quick-commerce platform later acquired by Zomato.
Unique Transaction Unfolds
Zomato’s strategic acquisition of Blinkit in August 2022 marked a pivotal moment, with the company issuing fresh equity shares to all selling shareholders of Blinkit. Notably, this transaction conferred stakes in Zomato to investors, including Tiger Global and SoftBank. Adding a unique twist, Zomato negotiated a 12-month lock-in for these shares, surpassing the standard six-month statutory requirement.
Sovereign Investors Uphold Confidence
In the midst of major exits, sovereign funds from Kuwait and Singapore have emerged as key players, demonstrating unwavering confidence in Zomato’s potential. The Kuwait Investment Authority, in particular, significantly increased its stake by acquiring 88 million shares in the September quarter and an additional 6.7 million shares in the subsequent October-December quarter. Simultaneously, the Singapore government made a notable entry into the scene, securing 95 million shares in Zomato during the December quarter. This move complemented the existing stake held by Singapore’s sovereign wealth fund, Temasek, totaling 169 million shares and representing approximately 1.9% of Zomato’s overall stake.
CPPIB Takes a Nuanced Approach
While optimism prevails among sovereign investors, the Canada Pension Plan Investment Board (CPPIB) opted for a measured reduction in its stake in Zomato over the past few quarters. This nuanced approach reflects the diverse perspectives of institutional investors in evaluating the trajectory of the company.
Global Brokerages Shift Thesis
Global brokerages have recalibrated their investment thesis on Zomato, foreseeing the company’s next phase of growth originating from its association with Blinkit. In a note, HSBC Global Research stated, “We believe food value is well captured in the current stock price, and further upside will largely be driven by the quick-commerce business. We now also expect profitability improvement to be gradual in the near-term, and hence market focus will be on quick-commerce growth.”
Zomato’s financial journey unfolds as a tale of resilience and adaptability, with major exits offset by the strategic moves of sovereign investors. The acquisition of Blinkit has positioned Zomato at the forefront of innovation, straddling the realms of food delivery and quick-commerce. As the company navigates this transformative period, the confidence displayed by sovereign funds from Kuwait and Singapore underscores a belief in Zomato’s potential to redefine the landscape of the food-tech industry.
