Uber Technologies is likely to sell its 7.8% stake in online food ordering platform Zomato through a block deal on Wednesday to raise up to Rs 3,300 crore ($420 million), according to a term sheet issued by BofA Securities, the sole bookrunner for the deal.
The sale has been fixed at Rs 48-Rs 54 apiece, a discount of 2.8-13.6% to Tuesday’s closing price of Rs 55.55 on the National Stock Exchange.
At the lower end of the price band, the sale could fetch Rs 2,939 crore or $373 million.
In January 2020, Zomato acquired Uber Eats’ India operations in a non-cash deal, following which Uber received about 10% stake in the restaurant discovery platform.
As of June 30, Uber Technologies held a 7.78% stake in Zomato.
Zomato’s shares surged about 20% on Tuesday to close at Rs 55.60 on the BSE.
Its stock has jumped 37% from a low of Rs 40.55 on the BSE on July 27.
Uber said in its earnings report on Tuesday that it had suffered an unrealised loss of $245 million during the second quarter and $707 million in the first half of 2022, on its investment in Zomato.
Uber’s total losses for the second quarter stood at $2.6 billion, of which $1.7 billion related to its equity investments and aggregate unrealised losses related to revaluation of its stakes in US-based self-driving tech company Aurora, Indonesian ride hailing firm Grab, and Zomato.
Zomato’s move to become profitable
During an investor call on Tuesday, Zomato’s chief financial officer Akshant Goyal said the company had an internal milestone to hit adjusted Ebitda (earnings before interest, tax, depreciation, and amortisation) level breakeven at a group level by the final quarter of the ongoing financial year, or latest by the second quarter of the next financial year (FY24).
Zomato defines adjusted Ebitda as Ebitda less share-based payment expenses.
On Monday, Zomato reported that it had hit adjusted Ebitda breakeven in its food delivery business. At a group level, its adjusted Ebitda loss reduced to Rs 150 crore in the first quarter (April-June) compared to a loss of Rs 220 crore in the fourth quarter of the previous fiscal year.
“I would say that change is always slow and then it is actually fast. You don’t wake up one day and say now I want to change and then change happens overnight. So, I think over the last year, we have been really prepping and working hard to set up the infrastructure to make this change happen. This quarter is when all of those things actually started to happen,” cofounder and chief executive Deepinder Goyal said, on whether the company had deliberately focussed on profitability now.
On Monday, Zomato reported consolidated losses of Rs 186 crore in the first quarter, nearly half from Rs 360.7 crore in the same period last year.
Quarterly revenue from operations grew to Rs 1,413.9 crore in the quarter ended June 30, a 67% jump from the year-ago period.
“I think the next milestone there is to get the overall Zomato to adjusted Ebitda level breakeven and we think we are close now. In terms of timeline, I think internally, we are aiming to get there by quarter four of this fiscal year,” Akshant Goyal said. “If we slip on that I think it should not be later than Q2 FY24, which is September 2023 quarter, from getting to a breakeven on adjusted Ebitda at a Zomato level,” he added.
Downgrades investment in Blinkit
In February, Zomato said it would invest $400 million in the quick commerce segment over the next two years. It revised the allocation on the call on Tuesday. It acquired Blinkit in an all-stock deal for Rs 4,447 crore.
“I think the business (Blinkit) has surpassed our expectations so far in terms of growth, as well as loss reduction back to where we were six, seven months ago,” CFO Goyal said. “We wanted to now update that overall budget and guidance down from $400 million to about $320 million. I think given where the business is today, and the path forward that we see, we think we should get that business also to breakeven with an investment of $320 million starting January 2022.”
Goyal said Zomato had already invested about $150 million in Blinkit in March in the form of a loan before the acquisition was announced and finalised.
Source: Economic Times