Chinese payments giant seizes opportune timing for exit as Zomato shares surge over 90% this year

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In a strategic move, Chinese payments group Alipay, a subsidiary of Ant Group, is set to sell its 3.4% stake in Indian food delivery giant Zomato for nearly $400 million through block deals on Indian stock exchanges, according to insider sources. The deal, orchestrated with advisory support from Bank of America and Morgan Stanley, is expected to take place later this week on Indian exchanges.

Zomato, India’s leading food delivery service, has experienced a remarkable resurgence, with its shares surging over 90% in the current year. This positive momentum follows a challenging period in 2022 when global tech stocks, including Zomato, faced significant declines. The impending deal with Alipay is poised to capitalize on Zomato’s recent market success.

The decision by Alipay to offload its entire 3.4% stake aligns with a broader trend of Chinese investors reducing their holdings in Indian companies. This move mirrors China’s Antfin, which sold a 10.3% stake in Indian financial giant Paytm back in August. The motivations behind these divestments may be influenced by a variety of factors, including market dynamics and geopolitical considerations.

The block deals for Alipay’s stake in Zomato are anticipated to be executed at 111.28 rupees per share, reflecting a 2.2% discount to Zomato’s closing price on Tuesday, as per the term sheet. This pricing strategy indicates Alipay’s desire to maximize returns while navigating the complexities of the stock market.

Insiders familiar with the matter state that Alipay’s decision to exit Zomato is primarily driven by the desire to “cash out,” with the timing deemed favorable due to the recent surge in Zomato’s share value. The company’s decision aligns with a broader trend of tech stocks, including Zomato, rebounding after a challenging period marked by a market meltdown and concerns about inflated valuations.

Zomato, India’s foremost player in the online food delivery sector, has been capitalizing on the growing demand for online ordering in recent years. The company’s aggressive expansion strategies have positioned it as a dominant force in the Indian market.

As Alipay prepares to divest its stake in Zomato, market analysts will closely monitor the implications of this move on both companies and the broader landscape of Chinese investments in Indian enterprises. The success of this deal could set a precedent for similar transactions and further define the dynamics of cross-border investments in the tech sector. Zomato, Bank of America, and Morgan Stanley have yet to officially comment on the planned transaction.

(Source: Nasdaq | Mint | Reuters | Business Standard)

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