Uber Technologies is likely to sell its 7.8 percent Zomato. This comes after the company’s latest acquisition and the company’s performance in the first quarter of this financial year.
Uber Technologies, the American transport company holds a stake of 7.8 percent in the food delivery company. This deal is likely to happen on Wednesday, 3 August 2022, and is expected to be a block deal. This was reported through Bank of America (BofA) Securities in their term sheet.Â
In January 2020, Zomato acquired Uber’s food delivery initiative Uber Eats in a non-cash deal. The deal was estimated for an amount of ₹1,376 crores excluding Goods and Services Tax (GST) which amounted to ₹248 crores. During this deal, Uber Technologies got a shareholding of 9.99 percent, nearly 10 percent in Zomato. Currently, the shareholding of Uber in Zomato is recorded at 7.78 percent.
The reasons estimated for this action are cited by analysts as the declining performance of the food delivery company. Since the Initial Public Offer (IPO) in June 2021, the company’s performance has weakened. In the first quarter (Q1) of this financial year (FY23) the company recorded a net loss of ₹186 crores which is less than the net loss in the previous quarter of ₹359.70 crores. Year on Year (YoY) this loss is less comparatively. Last year in the same quarter the company recorded a loss of ₹360.70 crores. Even though the company’s operations have increased, showing a rise in revenue of 67 percent, the company has not been able to break even or make a profit.
The reasons stated by the company for these losses were the infrastructural development, the issues in the supply chain, and other problems related to delivering service on time. The company also mentioned that over the past 4 years it has successfully developed a better chain of operations and solved infrastructure issues. Now, the company is ready to run rapid operations all over the country.Â
Despite these efforts, the company has not been able to meet the expectations of its stakeholders. The recent acquisition of the company with the quick commerce delivery giant, Blinkit was not famous among the stakeholders. On the other side, Zomato has made efforts and assured a better performance and shown us the brighter side of the acquisition.Â
Currently, the shareholding of Uber company is divided into eight parts:
- 4.69 percent is with the founder and CEO of the company, Deepinder Goyal
- 7.78 percent is owned by Uber Technologies
- 7.10 percent by Alipay Singapore, based in China
- 6.99 percent belongs to Antfin Singapore
- 5.10 percent is held by Sci Growth Investments
- 5.11 percent is through Internet Fund
- 48.06 percent is from other sources.
Uber Technologies will be selling its stakes through a block deal. A Block deal is a transaction of five lakh shares or a value of ₹5 crores minimum done at a single time.Â
The share price is fixed at ₹48-₹54 per share with a discount of 2.8 to 13.6 percent. The deal, with current prices, is estimated to be above ₹2,939 crores. On Tuesday Zomato’s share price rose by 20 percent to ₹56 as the company reported narrowed net loss for this quarter.Â
With its new initiatives, Zomato plans to expand its wings in the food industry. Its recent investments and other operational changes mark the track for the company. Meanwhile, the company might lose the interest of its shareholders with this shift. Uber Technologies has been a shareholder in the company for more than 2 years but the transition of the company was not taken well. Even the IPO was considered a failure and the investors were disappointed. After the situation of Zomato’s IPO, many internet companies reconsidered their decision. The future of Zomato is intriguing for all stakeholders and the company is leaving no space for doubt in the market. With all eyes on the company, the expectations have risen. Â
