Any thoughts on this…
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How has he estimated that Zomato could have built the same itself for less than 200 crores?
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Maybe he is wrong about the Rs 200 cr figure, but can one be comfortable with the valuations at which the deal has been done? Wanted to understand the viewpoint of fellow boarders.
(Interestingly, similar concerns about the valuation at which Blinkit was acquired were raised, however, Zomato management’s decision proved to be right.)
Disclosure: Invested at very low levels and planning to hold
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Contrarian EPS has provided valuable insights to many investors through his tweets. While his opinions are generally sensible and useful, particularly when it comes to traditional businesses. He has consistently held a negative view of Zomato since its inception. I’ve been following him for a long time, and he is not invested in Zomato.
Zomato, however, has a strong board, particularly with Mr. Sanjeev B, who holds the highest stake in the company.
Out of context, SB becomes board member of MMT. MMT paid him renumeration as board member, instead of taking in his personal account, he deposited it in to infoedge account, as he believes his all-time should allocate to infoedge.
Although mistakes can happen in business (such as the investment in housing.com by SB), overpaying for some assets is often less concerning. While it may appear that Zomato overpaid in this deal, strategic decisions in business sometimes require to take such deal. I believe there could be two reasons for pursuing a deal even if it seems costly:
Competitive Concerns: 3rd party, possibly Adani, might have been interested in the same deal. If that had happened, the market could have become more competitive with three players: BookMyShow (BMS), Adani, and Zomato. Now it’s duopoly with this deal.
Disruption Potential: I strongly believe BMS is vulnerable to disruption. Despite being in the market for a long time, their revenue has stagnated at around ₹800 crore (according to a CNBC report, although no specific source is available). Zomato’s CEO, who is one of the smartest entrepreneurs, likely didn’t want to wait any longer to make a strategic move.
Disclaimer: I am invested in Zomato, and my views may be biased in favor of Zomato and most new-age entrepreneurs.
My mistake: Eventhough invested around 50 and following it from IPO, couldn’t able to increase my allocation.
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Even though Zomato’s value has surged 5 times from $5 Bn to over $25 Bn in the last 2 years, but I believe we are missing the biggest point!
The more relevant and most underappreciated fact is that the rise has happened when roughly 40% of its total equity was actually being sold by pre-IPO investors/owners in open market! Ownership of Uber, Alipay, Tiger Global Management, Sequoia and more have fallen to 0% or at below 1%. Just last week, Antfin sold its 2.12% stake in Zomato.
India has never seen a similar circumstance before, where a listed entity has continuous supply of shares being dumped in the market, adding to its free float, but the share prices doesn’t stop rising & goes on to become part of ‘Top 50’ most valued listed entity in the same time frame.
𝐐: 40% was sold, did the retail investors buy it?
𝐀𝐧𝐬: NO! The share of individual investors have actually fallen from 9.88% two years ago to 8.67% today.
Then WHO BOUGHT IT?
INSTITUTIONS! (The FPIs now own 55% of Zomato, includes Govt. of Singapore, Canadian Pension Fund, etc., and many domestic MFs which collectively own 13%) - Detailed analysis of this coming soon.
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InfoEdge from Sept 2021 - 15.23% to June 2024 - 13.53%
Deepinder Goyal from Sept 2021 - 4.71% to June 2024 - 4.19%
Slow and steady …
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@prashanti - There is an angle of Blinkit merger here which happened in 2022 which was an all stock deal - because of which the equity base increased. None of Infoedge & Deepinder Goyal have actually sold!
Rather within next 2 years as ESOPs allocated get converted to actual shares, Deepinder’s holding is bound to increase significantly.
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Me too holding from IPO and almost at 60. But could not increase allocation. It flew off before I could decide.
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“Ola Consumer nears 1 lakh daily orders on ONDC; Bengaluru food delivery at 20% of Swiggy-Zomato’s scale: Bhavish Aggarwal”
What views do you all have on other players grabbing food delivery share through ONDC in general? Does it seem like a risk to the duopoly of Zomato & Swiggy?
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People on socials have been mentioning a lot on Zomato/ Blinkit in last few months, is it impacting the share price?
In the last 2 years as share price of Zomato has rocketed by 5X, one might think a lot of retail investors are buying into the story. Also because more & more people are now getting to know & experience quick commerce i.e. Blinkit - loyal customers tend to become shareholders more often! (agreed?)
One must note that Zomato’s listed shares have witnessed roughly 45% of its equity being sold by top PE funds & others in last 2 years ever since the lock in restriction by SEBI got over since 25th July, 2022 (which is 1 year post listing). Sellers include Uber, Alibaba Group, Tiger Global Management, Sequoia & more. So there is a huge gap inform of free float that got added, retail investors might have filled some of that gap, right?
BUT DATA TELLS A DIFFERENT STORY!
Retail investors own barely 8% of Zomato and their holding has not increased (rather falling over 2 year period!). Neither do analysis of google search trends confirm any rise in interest in share price of Zomato in last many months!
This week we presented a detailed analysis on fast changing share holding patterns of Zomato in the last 2 years on ‘Finding Outperformers’!
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Zomato added 400,000+ unique shareholders in the first six months of 2024, but does it move the needle in increasing the share price?
Buzz around Blinkit and Zomato has been rising lately on platforms like LinkedIn and X. Whether it’s the growth of quick commerce, with Blinkit as the largest player, or new initiatives and features launched by Zomato, including the upcoming ‘District’ app, they have been attracting attention. This, in turn, has led to many new retail investors buying the stock recently as the data shows.
BUT IT’S NOT ENOUGH TO MOVE THE NEEDLE!
While the absolute number of additions in 2024 looks significant, in terms of the total percentage of shareholding, it actually isn’t. New retail investors buying Zomato stock in the first six months of 2024 didn’t even result in a 1% rise in retail shareholding. This percentage is minuscule, especially considering that Alibaba Group just in August 2024 sold a 2.40% stake in Zomato in one go, contributing to a total of 43% shareholding being sold by various investors over the last two years.
One might assume there’s a frenzy with everyone discussing the same company, but that might not be the case just yet! Any thoughts?
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