Uber plans to sell its 7.8% holding in Indian food-delivery firm Zomato today (Aug. 2).
The ride-hailing giant is looking to raise up to Rs 3,300 crore ($420 million), according to a term sheet issued by Bank of America Securities, the sole bookrunner for the deal, The Economic Times reported.
In January 2020, Uber Eats sold its India business to Zomato. The $350 million all stock-transaction gave Uber 9.99% ownership in the Gurugram-based food-delivery firm.
While quitting a sector with high competition and low margins is routine for San Francisco-based Uber, Zomato’s subsequent dismal performance was unexpected. This bleeding American company took a bigger hit, losing $707 million on its Zomato investment alone in the first half of this year.
A year ago, the highly-anticipated Zomato initial public offering (IPO) finally went live. It was a risky move given the weak financial standing and the payoff has not been great, with the stock sliding nearly 60% from is debut price.
The stock recovered from this dip after reporting earnings on July 26, but not enough to make up for the year-long plummet. The company, which boasted of a massive $13 billion-plus valuation during its public debut, is now valued at a far lower $4.6 billion.
Industry-watchers aren’t writing the stock off yet given Zomato’s keen eye on profitability.
“With only 15 million monthly transacting users currently, Zomato has a long runway for customer acquisition and revenue growth, albeit this may come at the cost of near-term profitability,” an Aug. 2 Jefferies analyst’s note said. “The platform also has an optionality of expanding into other adjacent categories such as grocery etc.”