China's Alipay is planning to sell its entire 3.44% stake in the Indian food delivery giant Zomato for $400 million, according to Reuters. The Chinese company intends to execute this transaction at a strategic market time using block deals. Zomato has recently achieved its highest share price in the past 52 weeks due to positive results in the September quarter. The expected block deals are scheduled to occur at Rs 111.28 per share, representing a slight 2.2% discount from Zomato's closing price on Tuesday.
It is worth mentioning that Antfin Singapore Holding, an affiliate of Alipay, currently possesses a 6.39% stake in Zomato as of September 2023.
Despite the broader challenges in India's startup landscape, Zomato has achieved a noteworthy resurgence. The company has successfully become profitable on a quarterly basis, with an impressive 18-fold increase in after-tax profits to Rs 36 crore in Q2 FY24. In the same period, the previous year, the company lost Rs 251 crore.
Zomato experienced a substantial increase in its Q2 FY24 revenue, with a rise of almost 18% to Rs 2,848 crore. This was a significant improvement from the previous quarter's revenue of Rs 2,416 crore. The growth can be attributed to Zomato's B2B supply divisions, specifically Hyperpure and Blinkit, which contributed Rs 745 crore and Rs 505 crore, respectively, during Q1 FY24.
Despite Alipay's exit aligning with a strategy observed in previous Indian startup investments, it also reflects the overall trend of exercising caution towards Chinese investment following the India-China border clash in 2020. In August, Antfin reduced its stake by over 10% in Paytm, and earlier in the year, Alibaba sold its remaining stake in the fintech firm for approximately $167 billion in February.
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According to the most recent update, Zomato is currently being traded at Rs 118.20.
In conclusion, Alipay's choice to divest from Zomato is in line with its established strategy and reflects the cautious sentiment surrounding Chinese investments in Indian startups. Furthermore, Zomato's strong performance, characterized by profitability and revenue growth, serves as evidence of its resilience in the demanding startup environment.
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