Eternal, the company previously known as Zomato, experienced significant fluctuations in its stock price on Monday after announcing a new limit on foreign shareholding at 49.5%. Initially, shares dipped by more than 2% but later rebounded, reaching an intraday high of ₹235.20 on the BSE, reflecting the volatile nature of investor sentiment. The board’s decision, made on April 18, is pending shareholder approval through a postal ballot, with results anticipated by May 21, 2025.
Shareholding Dynamics and Future Implications
As of March 31, 2025, Foreign Institutional Investors (FIIs) held 44.88% of Eternal, while Indian shareholders accounted for 55%. This distribution fulfills the criteria necessary for the company to be recognized as an Indian-Owned-and-Controlled Entity (IOCC).
- Current FII Share: 44.88%
- Indian Ownership: 55%
- IOCC Status: Essential for operational flexibility
According to the company, this strategy is designed to maintain its IOCC status, adhere to regulatory requirements, and enhance operational capabilities, particularly for its quick commerce division, Blinkit.
Transitioning to an Inventory Model
Currently, Blinkit functions as a marketplace reliant on third-party vendors. Achieving IOCC status will enable a pivotal shift towards an inventory-led approach, where Blinkit can directly manage its inventory. This strategic pivot could open avenues for expansion into diverse categories including:
- Home décor
- Gourmet foods
- Toys
- Seasonal products
While this transition may necessitate increased working capital, it is projected to enhance profit margins and improve Return on Capital Employed (ROCE) over time. Analysts from Kotak Institutional Equities estimate a potential margin increase of 40–50 basis points, despite the anticipated heavier balance sheet.
Competitive Edge in the Market
With the IOCC designation, Blinkit will be positioned competitively against established domestic retailers like Reliance and DMart. Notably, Blinkit will be the sole IOCC among e-commerce companies, setting it apart from competitors like Swiggy, Zepto, Flipkart, and Amazon, who have lower domestic ownership percentages.
Market Index Considerations
However, experts caution that this foreign ownership cap may negatively impact Eternal’s standing in global indices, leading to potential capital outflows from passive funds.
- MSCI Impact: The company’s allocation in the MSCI Standard Index, currently at 1.33%, could be reduced by half, resulting in potential outflows of around $600 million (about 226 million shares).
- FTSE Impact: There is also a risk of being completely removed from the FTSE Emerging Markets Index, which could lead to quarterly outflows of approximately $100 million (around 37 million shares).
Stock Price Forecast
Despite the expected index-related pressures, analysts remain optimistic about Eternal’s long-term prospects. "A potential price adjustment of around 5% may occur due to this news, but I do not foresee a significant long-term decline in stock value," noted Abhilash Pagaria from Nuvama Alternative & Quantitative Research. He added that there is strong interest among domestic investors to acquire shares if prices drop below ₹205 or ₹210.
Stock Performance Overview
Eternal’s stock has shown resilience, gaining 2.5% over the past month and over 8% in the last three months. Although shares have seen a 12% decline over the last six months, they have surged by 23% year-on-year, delivering impressive returns of 316% over the past two years.
As of 12:35 PM, shares of Eternal were trading 0.58% higher at ₹233.10 on the BSE, reflecting ongoing market interest and activity.
For more insights on the dynamics of new-age tech stocks, check out our article on the expected performance of Swiggy, Zomato, and Nykaa in the upcoming quarter.
