Zomato board rejects EY valuation that priced its shares lower for Blinkit deal

Zomato CEO Deepinder Goyal

Zomato’s board has decided to keep the fair value of its shares at Rs 70.76 apiece for the all-stock deal to acquire quick commerce company Blinkit despite a valuation report by EY that pegs the foodtech company’s shares at a lower price.

According to a BSE filing by Zomato, accounting major EY had first reached upon the price of Rs 70.76 in a report on June 24, the date on which the acquisition was announced.

However, after the BSE and NSE had asked for a fresh evaluation based on other methods, the accounting firm came up with a lower price for Zomato shares on July 20. The company has not disclosed what the lower price was.

Meanwhile, Zomato shareholders approved a preferential issue of shares at Rs 70.76 on July 25 to pave way for the deal. 

When the Zomato board met on August 4 to review the second EY report, it decided to keep the price arrived at in the earlier evaluation. This decision of the board effectively means that Blinkit shareholders will get fewer Zomato shares in the Rs 4,447 crore ($570 million) deal. 

Zomato is witnessing an exit of several prominent pre-IPO investors as the lock-in period ends. Hedge fund Tiger Global’s investment vehicle Internet Fund IV has halved its stake in Zomato — from 5.11 percent to 2.77 percent. Tiger Global, which led investment rounds in the company in September 2020 and February 2021, sold 18 crore shares of Zomato.

Also, ride-hailing giant Uber exited Zomato by selling its entire 7.78% stake through a block deal.

As Moneycontrol had reported last month, a big sell-off pressure among pre-IPO investors has been on the cards with the end of the one year lock-in period. Venture capital firm Moore Strategic Ventures had also sold its entire stake last week.

Meanwhile, capital markets regulator Securities and Exchange Board of India (SEBI) has asked Zomato to clarify the company’s plans to have a multiple CEO structure under an entity named ‘Eternal’, a move Moneycontrol first reported earlier this week.