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Difficult to 'blink it': Zomato says sticking to offer price for Blinkit shares
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IANS | 06 Aug, 2022
Food delivery company Zomato Ltd has said it was sticking to its
original issue price of Rs 70.76 per share for the acquisition of Blink
Commerce Private Ltd ("Blinkit").
In a regulatory filing
late on Friday, Zomato said that this issue price was arrived at, based
on the valuation report from Ernst and Young Merchant Banking Services
LLP (EY).
The company went in for a second valuation report from
EY on the specific requests from the BSE Ltd and the National Stock
Exchange Ltd.
The second valuation report from EY used different
valuation methodologies viz. net asset value and comparable trading
multiples.
"The New Report was not an addendum to the Original
Report and had no bearing or relevance on the issue price of the shares,
since the issue price per share, arrived at as per SEBI ICDR (as per
the Original Report), is higher than the value(s) per share as per the
New Report.
"It was solely obtained pursuant to specific request
of the exchange(s) and submitted to them (BSE on July 20, 2022 and NSE
on July 21, 2022)," Zomato said.
However, the food delivery major did not disclose the price arrived at by EY in its second report.
The
company had said it will issue on preferential basis equity shares up
to 62,85,30,012 for a consideration other than cash, being the discharge
of total purchase consideration of Rs 4,447.47 crore for the
acquisition of up to 33,018 share of Blinkit.
Earlier, Zomato, on
direction of the Securities and Exchange Board of India (SEBI), had
come with clarifications on the issues raised by the media on the
Blinkit acquisition.
As part of the acquisition, it said it will also acquire Blinkit's net debt of Rs 673.1 crore.
"Please
note that the deal value should include only the consideration paid for
the purchase of the proposed acquisition targets and should not include
any estimated future investments into the acquisition targets by
Zomato," the company said in a statement.
On the issue of
conflict of interest in Blinkit acquisition -- Akriti Chopra, a senior
official, is the wife of Albinder Singh Dhindhsa, the co-founder of
Blinkit -- Zomato said she is neither a Director or key managerial
personnel as defined under the Companies Act, 2013 and Listing
Regulations, nor is she a person in accordance with whose directions or
instructions the Board of Directors is accustomed to act.
"Additionally
since the inception of the deal, she was and continues to remain the
Chief People Officer of the Company and this transaction had no overlap
with her role," Zomato said.
Accordingly, she is not a related
party to this transaction, under the definition of related party and KMP
in terms of Companies Act, 2013 and/or Listing Regulations, hence there
was no requirement for making a disclosure for a 'related party
transaction' in this regard, the company said.
"We also took an
independent opinion from our legal advisor Saraf and Partners on there
being no related party transaction under applicable laws," Zomato added.
Zomato's
scrip is changing hands at about Rs 54.50 per share at the bourses. It
came out with an initial public offer (IPO) of its equity shares at a
price of Rs 72 to Rs 76.
The scrip also touched 52 week high of
Rs 169.10 and then slid down to change hands at Rs 54.50 per share. The
market capitalistion was Rs 42,946.03 crore.
Noted investor
Rakesh Jhunjhunwala, at a conclave organised by a media house, had said
that people will laugh at him on hearing him say that they should not
buy Zomato shares. At that time the share was orbiting at a higher
plane.
Jhunjhunwala also said that the market will correct itself.
Others too expressed views on buying Zomato's shares at the IPO.
Jefferies
India, in a research report on Zomato, has said: "With only 15 mn
monthly transacting users currently, Zomato has a long run-way for
customer acquisition and revenue growth, albeit this may come at the
cost of near-term profitability. The platform also has an optionality of
expanding into other adjacent categories such as grocery etc."
It
recommended a buy call on Zomato's shares listed out the following as
the upside catalysts: Strong macro and up-tick in discretionary demand,
rapid adoption of digital commerce which drives user acquisition for
platforms such as Zomato, and successful ramp-up across adjacent
businesses such as groceries, etc.
On the downside catalysts, the
report listed: Increase in competition from new entrants, Swiggy,
direct ordering, slower-than-expected market growth, adverse regulations
for platform businesses, uncertainty on unit economics, and challenges
in expanding beyond the core.
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