Zomato parent entity caps foreign ownership in company at 49.5%

The board of Eternal, food-tech major Zomato’s parent entity, has approved the cap of up to 49.5% on total foreign ownership in the company.

The company’s move comes days after Commerce Minister Piyush Goyal said he wished more Indian investors, than foreign players, were buying stakes in Indian startups.

"I only wish they'd had more Indian investors, rather than the foreigners buying off all our startups. And yes, we need more Indian investors into the game,” he had said, at Startup Mahakumbh.

India’s FDI rules restrict majority foreign-owned companies from having ownership or any control over the inventory—a point that has attracted scrutiny for companies such as Walmart-owned Flipkart and Amazon.

Quick commerce platform Blinkit, which is also owned by Eternal, operates without owning the inventory in its books, with other third-party sellers carrying the inventory.

Also Read

Zomato doubles down on investment in Blinkit with a Rs 1,500 Cr bet

Zomato’s qualified institutional placement (QIP) of Rs 8,500 saw many domestic takers, helping the company reduce foreign ownership to below 50%. This will enable the company to own the inventory it sells on its platform.

A similar trend is also playing out at Blinkit’s rival, IPO-bound Zepto. According to reports, the quick commerce player is looking to boost domestic ownership to around 50% through a secondary share sale as it readies its cap table to be listed on public bourses.

Many startups are also looking to shift domicile back to India amidst increased IPO activity and easier regulatory compliances.

Meanwhile, the Indian government has been taking steps to permit an increase in foreign ownership in Indian companies. For instance, it now allows 100% FDI in insurance companies.