Block deal with zomato: Uber Technologies likely to sell 7.8% stake in Zomato via block deal

Uber Technologies most likely to sell 7.8% shares on an online food ordering platform via a block deal on Wednesday to raise up to Rs 3,300 crore ($420 million), according to a terms sheet released by BofA Securities, the deal’s sole bookrunner.

Sales recorded on 48-54 rubles per piecea 2.8-13.6% discount to Tuesday’s closing price of Rs 55.55 on the National Stock Exchange.

At the bottom of the price range, the sale could fetch Rs 2,939 crore or $373 million.

In January 2020, Zomato acquired Uber eatsIndia is working on a cashless deal, after which Uber received a 9.19% stake in the restaurant opening platform.

As of June 30, Uber Technologies owned a 7.78% stake in Zomato.

Zomato shares rose about 20% on Tuesday to close at Rs 55.60 on the BSE.

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Its shares jumped 37% from a low of Rs 40.55 on the BSE on 27 July.

Uber said in its earnings report Tuesday that it posted an unrealized loss of $245 million in the second quarter and $707 million in the first half of 2022 due to its investment in Zomato.

Uber’s total loss in the second quarter was $2.6 billion, of which $1.7 billion was attributable to its equity investment and cumulative unrealized losses related to the revaluation of its stakes in U.S. self-driving car company Aurora, Indonesian company Grab. engaged in the search for cars, and Zomato. .

Zomato’s move towards profitability
During a phone call with investors on Tuesday, Zomato CFO Akshant Goyal said the company has an internal milestone to reach group-level adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) break-even by the last quarter of the current financial year. year or no later than the second quarter of the next fiscal year (FY24).

Zomato defines Adjusted Ebitda as Ebitda less share-based payout costs.

On Tuesday, Zomato reported that it had reached break-even on adjusted Ebitda in its food delivery business. At the group level, adjusted Ebitda loss narrowed to Rs 150 crore in the first quarter (April-June) compared to a Rs 220 crore loss in the previous fiscal year’s fourth quarter.

“I would say that change is always slow, but in fact it happens quickly. You don’t wake up one day and say that now I want to change, and then the change happens overnight. So, I think over the past year we’ve really been preparing and working hard to build the infrastructure to make this change happen. This quarter it all really started to happen,” co-founder and chief executive Deepinder Goyal said about whether the company is now deliberately focusing on profitability.

On Monday, Zomato reported a consolidated loss of Rs 186 crore in the first quarter, almost half of Rs 360.7 crore in the same period last year.

Quarterly operating revenue rose to Rs 1,413.9 crore in the quarter ended June 30, up 67% from last year.

“I think the next milestone will be getting Zomato to break even on adjusted Ebitda, and we think we’re close to that. In terms of timing, I think internally we are aiming to achieve this by the fourth quarter of this fiscal year,” said Akshant Goyal. “If we slip on this, I think it should be no later than the second quarter of FY24, which is the quarter of September 2023, from breaking even on Adjusted Ebitda at the Zomato level,” he added.

Lowers investment in Blinkit

In February, Zomato said it would invest $400 million in the fast-paced commerce segment over the next two years. He revised the distribution on a call on Tuesday. He acquired Blinkit in an equity deal for Rs 4,447 crore.

“I think the (Blinkit) business has exceeded our expectations in terms of growth as well as reducing losses to where we were six to seven months ago,” said CFO Goyal. “Now we wanted to update this overall budget and the forward estimate is down from $400M to around $320M. I think given the state of the business right now and the path forward we see, we think we should break even with this business as well with a $320M investment. from January 2022.”

Goyal said Zomato had already injected about $150 million into Blinkit in March in a loan before the acquisition was announced and completed.