China's Alipay pulls out of Zomato, sells its stake for $400 million, as per leaked term sheet

Chinese payments giant Alipay has initiated a $400 million accelerated bookbuild to divest its stake in the prominent Indian food delivery firm, Zomato, according to the term sheet released on Wednesday.

This move follows a previous report by Reuters on Tuesday, indicating Alipay’s intention to sell its 3.4 per cent stake in Zomato through block deals on Indian stock exchanges.

Alipay, a subsidiary of Ant Group, is set to offload its entire 3.44 per cent stake in Zomato through this deal, as per the term sheet obtained by Reuters. Bank of America and Morgan Stanley have been enlisted as advisers for the transaction, which is anticipated to be executed at a later date.

Neither Zomato, Bank of America, nor Morgan Stanley have provided immediate responses to requests for comments, and Alipay has not responded outside regular business hours.

Zomato’s shares have experienced a notable surge, exceeding 90 per cent growth this year, bouncing back from a decline of over 50 per cent in 2022 when global tech stocks faced challenges.

The decision by Alipay to divest its stake aligns with favourable market conditions, with Zomato’s shares witnessing a rapid rise in recent months, as mentioned by an anonymous source.

The block deals are expected to be executed at Rs 111.28 per share, representing a 2.2 per cent discount to Zomato’s closing price on Tuesday, according to details outlined in the term sheet.

Before this Japan’s SoftBank sold a 1.1 per cent stake in Zomato back in October. The increased demand for online ordering in recent years has prompted companies like Zomato to aggressively expand their operations.

Alipay’s decision to exit Zomato is part of a broader trend, as other Chinese investors have been reducing their stakes in Indian companies. In August, China’s Antfin sold a 10.3 per cent stake in Indian financial giant Paytm.

The tech sector, including companies like Zomato, has rebounded after a challenging year, marked by a market downturn. Investors have raised concerns about the high valuations of some Indian startups that made their stock market debuts in recent years.