Eternal To Cap Foreign Ownership At Under 50%

Zomato and Blinkit parent Eternal plans to cap the foreign ownership in the company at 49.5%. In a meeting on Friday (April 18), the company’s board approved the proposal to limit the foreign ownership on a fully diluted basis. 

The investors whose shareholding will be capped include foreign direct investors (FDIs), foreign portfolio investors (FPIs) and non-resident Indians (NRIs). The company will now seek the approval of its shareholders for the proposal. 

At the end of the March quarter (Q4), foreign shareholding in Eternal stood at 44.36%, down nearly 3% from 47.30% at the end of the December quarter. Its foreign stakeholders include Kuwait Investment Authority Fund, Antfin, Vanguard, the Singapore government, among others. 

While overseas backers pared their stakes, domestic shareholders increased their shareholding in the company to 23.56% at the end of Q4 of the fiscal year 2024-25 (FY25) from 20.54% in the preceding quarter. Domestic mutual funds that hold a stake in the foodtech giant include Mirae Asset, Axis, HDFC, Kotak, ICICI. 

Why Is Eternal Pushing For Domestic Ownership?

Eternal is looking to limit foreign ownership as it looks to “reinforce” its identity as an Indian-owned-and-controlled company (IOCC). The foodtech major also said that the classification will help build safeguards to maintain domestic control in the absence of an “identifiable promoter group holding a substantial stake” in the company. 

In its shareholder notice, the company said that maintaining the IOCC tag will offer it “greater operational flexibility” and unlock new opportunities in the quick commerce space. 

Elaborating on this, it added that maintaining the status will help its quick commerce vertical Blinkit transition to an “inventory ownership” model from the current marketplace model led by third-party sellers. 

Eternal said that pivoting to the inventory model, by virtue of the IOCC status, will help Blinkit drive growth by introducing new and underserved categories which “third-party sellers or Indian brands may not currently be investing in” such as home décor, gourmet foods, toys, pooja items, and seasonal merchandise. 

“By offering working capital support directly to small brands and manufacturers and/ or by using our balance sheet to own inventory, Blinkit can help drive growth for many such product categories,” Eternal said. 

It also sees the inventory model helping the company enhance margins in fragmented or unbranded categories as well as established FMCG categories 

“This change (pivoting to inventory model) aligns with our strategy to optimise the assortment, quality, and value mix for our customers in the quick commerce business. While this will make the business moderately more working capital-intensive, we will use our balance sheet carefully where we believe the strong RoCE (return on capital employed) potential and long-term value creation justify the approach,” added Eternal. 

The company also claimed that maintaining the IOCC status is in line with its long-term vision to “innovate faster, serve customers better, support local entrepreneurs, and deliver stronger returns to shareholders” while supporting existing operations and future growth initiatives.

The development comes at a time when the government has expressed preference for larger domestic ownership in quick commerce grocery delivery companies. At the Startup Mahakumbh earlier this month, commerce minister Piyush Goyal highlighted the foreign shareholding of IPO-bound quick commerce major Zepto. 

“When it comes to instant grocery delivery, I don’t have problems. They can list at a few billion dollars, I will be really happy. I only wish that they had more Indian investors rather than foreigners buying all of our startups,” the minister said. 

Notably, Zepto too has been actively working to increase domestic shareholding. In March, it was reported that the startup was looking to raise a debt of $100 Mn to $150 Mn to buy shares from existing foreign investors.

Meanwhile, shares of Eternal ended Thursday’s (April 17)  trading session 4.37% higher at INR 231.75 on the BSE.

Editor’s Note: The story has been edited to add more details from Eternal’s shareholder notice.