Why Eternal is seeking cap on foreign ownership; share price targets

Why Eternal is seeking cap on foreign ownership; share price targets

Eternal share price: JM Financial said the move would enable Blinkit to better compete with competition, as most competitors today continue to have majority foreign ownership. 

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ICICI Securities, which has a target of Rs 320 on Eternal, said the company's move to cap foreign shareholding would pave the way for it to gradually move to an ‘owned inventory’ model. ICICI Securities, which has a target of Rs 320 on Eternal, said the company's move to cap foreign shareholding would pave the way for it to gradually move to an ‘owned inventory’ model. 
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Amit Mudgill
  • Apr 21, 2025,
  • Updated Apr 21, 2025 3:25 PM IST

Eternal (erstwhile Zomato Ltd) is seeking shareholder approval to cap its total foreign ownership up to 49.5 per cent on a fully diluted basis. This is after the proposal received an approval from its board. 

At the end of March quarter, foreign ownership in Eternal stood 44.88 per cent. If approved, it would pave the way for Eternal to be classified as an 'Indian-Owned-and-Controlled Company (IOCC)' from current 'Foreign-Owned-and-Controlled' company. 

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"The IOCC classification is crucial for Eternal to be able to switch to an own inventory business model in its quick commerce business (Blinkit) from a marketplace business model that it currently operates. This change will enable it to expand its category/merchandise offerings, reduce dependence on third-party-sellers or offer them working capital support and vastly improve its operating margins (as and when the current phase of aggressive dark store expansion slows)," said JM Financial in a note.

The brokerage said the move would enable Blinkit to better compete with competition, as most competitors today continue to have majority foreign ownership. 

"We, however, await more details before incorporating any estimate changes in our model. We reiterate our view that long-term investors should use any volatility in the stock, due to technical factors or rise in Blinkit’s losses, to build a sizeable position in the name," JM said while suggesting a target price of Rs 280 on the stock. 

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ICICI Securities, which has a target of Rs 320 on Eternal, said the company's move to cap foreign shareholding would pave the way for it to gradually move to an ‘owned inventory’ model. 

"We think this could aid in 100–150 bps adjusted Ebitda margin improvement in the quick commerce (QC) business over the next 1–2 years. The quantum of improvement would be contingent on the proportion of categories and SKUs moved to the inventory model, it said.

The broking firm said the additional working capital needed for this move would be in the range of Rs 1,000–2,000 crore at current scale, which is only a fraction of Eternal's Rs 19,000 crore cash pile. 

"We think the 49.5% cap leaves enough headroom, given current foreign shareholding is ~45%. While there is likely to be some outflow, we think it may not lead to material correction. We re-iterate BUY given an improving medium-term margin outlook in QC," it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

Eternal (erstwhile Zomato Ltd) is seeking shareholder approval to cap its total foreign ownership up to 49.5 per cent on a fully diluted basis. This is after the proposal received an approval from its board. 

At the end of March quarter, foreign ownership in Eternal stood 44.88 per cent. If approved, it would pave the way for Eternal to be classified as an 'Indian-Owned-and-Controlled Company (IOCC)' from current 'Foreign-Owned-and-Controlled' company. 

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"The IOCC classification is crucial for Eternal to be able to switch to an own inventory business model in its quick commerce business (Blinkit) from a marketplace business model that it currently operates. This change will enable it to expand its category/merchandise offerings, reduce dependence on third-party-sellers or offer them working capital support and vastly improve its operating margins (as and when the current phase of aggressive dark store expansion slows)," said JM Financial in a note.

The brokerage said the move would enable Blinkit to better compete with competition, as most competitors today continue to have majority foreign ownership. 

"We, however, await more details before incorporating any estimate changes in our model. We reiterate our view that long-term investors should use any volatility in the stock, due to technical factors or rise in Blinkit’s losses, to build a sizeable position in the name," JM said while suggesting a target price of Rs 280 on the stock. 

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ICICI Securities, which has a target of Rs 320 on Eternal, said the company's move to cap foreign shareholding would pave the way for it to gradually move to an ‘owned inventory’ model. 

"We think this could aid in 100–150 bps adjusted Ebitda margin improvement in the quick commerce (QC) business over the next 1–2 years. The quantum of improvement would be contingent on the proportion of categories and SKUs moved to the inventory model, it said.

The broking firm said the additional working capital needed for this move would be in the range of Rs 1,000–2,000 crore at current scale, which is only a fraction of Eternal's Rs 19,000 crore cash pile. 

"We think the 49.5% cap leaves enough headroom, given current foreign shareholding is ~45%. While there is likely to be some outflow, we think it may not lead to material correction. We re-iterate BUY given an improving medium-term margin outlook in QC," it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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