A leading food delivery stock is in the spotlight after it proposed to lower its foreign ownership limit from 75 percent to 49.5 percent. The move, currently up for shareholder approval, could trigger passive outflows of nearly $700 million due to potential changes in MSCI and FTSE index weightages.
Price Movement
During Tuesday’s trading session, share price of Eternal Ltd reached an intraday high of Rs.243.45 per share, rising 4 percent from the previous close of Rs.234.15 per share. The shares have retreated since then and currently trading at Rs.237.60 apiece.
What Happened
Eternal (formerly Zomato Ltd) has proposed to reduce its Foreign Ownership Limit (FOL) from 75 percent to 49.5 percent, a move currently pending shareholder approval through a postal ballot. The outcome of the vote is expected by May 21, 2025. This strategic decision is intended to better align the company with Indian regulatory norms and provide enhanced operational flexibility, especially for its quick commerce vertical, Blinkit.
However, the proposed FOL reduction could impact passive investment flows. According to estimates by Nuvama Alternative Research, changes to the MSCI Standard Index due to the lowered FOL could lead to outflows of approximately $600 million. This translates to a potential sell-off of around 226 million shares, equivalent to 2.7 days of trading volume. Additionally, adjustments to the FTSE Emerging Markets Index could result in a smaller outflow of around $100 million, or 37 million shares, roughly 0.4 days of trading volume.
Despite these potential outflows, Nuvama noted that Eternal’s move was widely anticipated by market participants. While MSCI-related outflows may cause some short-term pressure on the stock, the FTSE index changes are expected to be more gradual. Importantly, the impact from FTSE adjustments could be limited if the Foreign Institutional Investor (FII) headroom rises above 10 percent, which may lead to a pause in the outflow trajectory.
Business Segments
Eternal Ltd is a prominent player in the online food delivery space, operating both in India and internationally. Its primary business segments include the India Food Ordering and Delivery platform. The company also runs Hyperpure, a B2B procurement service that supplies restaurants with essential kitchen ingredients and products.
In addition to its core operations, Eternal has expanded into quick commerce through Blinkit, a platform that delivers daily essentials to customers within minutes. The company also offers event discovery and ticketing services for food festivals, concerts, and comedy shows under its “Going Out” segment. Other services include event management, payment aggregator and gateway operations, as well as trading, financing, and investment-related activities.
Earnings Report
According to its recent financial updates, Eternal Ltd reported consolidated revenue of Rs.5,405 crores in Q3 FY25, representing a growth of approximately 64.4 percent compared to Rs.3,288 crores in Q3 FY24. Despite the strong top-line performance, the company’s net profit declined to Rs.59 crores, down from Rs.138 crores in the same quarter last year.
Ratio Analysis
The company has a Return on Capital Employed (ROCE) of 3.8 percent and a Return on Equity (ROE) of 3.48 percent. Its Price-to-Earnings (P/E) ratio stands at 339.35, higher than the industry average of 43.87. Furthermore, the company maintains a current ratio of 2.2, debt-to-equity ratio of 0.05, and an earnings per share of Rs.0.69.
Written by – Siddesh S Raskar
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Inshorts
Eternal Ltd proposed cutting its foreign ownership limit from 75 percent to 49.5 percent, triggering potential passive outflows of nearly $700 million due to MSCI and FTSE index changes. The stock hit Rs.243.45 before settling at Rs.237.60. The move, aimed at regulatory alignment, is pending shareholder approval, with results expected by May 21.
