Eternal Shares Rise Over 4% On Hopes of MSCI Weight Restoration; Brokerages See $520 Million Passive Inflows 

Mumbai, July 9: Shares of Eternal Ltd, the parent of Zomato, gained as much as 4.5% on Thursday after fresh shareholding data fuelled expectations that the stock could regain its full weight in the MSCI indices during the August review, potentially attracting hundreds of millions of dollars in passive foreign inflows.

The stock rose to an intraday high before trimming some gains to trade around 2% higher at ₹292.60. The rally came after analysts said the company’s foreign ownership headroom had expanded sufficiently to remove the restrictions that had previously led MSCI to halve its index weight.

Why MSCI Weight Matters

MSCI’s global equity indices are tracked by several passive funds and exchange-traded funds (ETFs), making any change in index weightage an important trigger for stock flows.

According to analysts, Eternal’s foreign investment headroom has now increased to more than 25%, making it eligible for restoration to its full MSCI weight during the August index review.

If the revision goes through, the brokers estimate the stock could attract nearly $520 million in passive inflows from global index-tracking funds.

What Changed?

Eternal’s weight in the MSCI index had previously been cut to half after foreign ownership headroom fell sharply.

Stock is rallying as investors see MSCI restoring its weight on the index. Source: NSE

Because of the limited foreign headroom, MSCI reduced the stock’s investability factor, lowering its representation in the benchmark index.

The latest June-quarter shareholding pattern, however, indicates that foreign ownership room has expanded considerably, with available headroom increasing from 9.33% to above 25%. Analysts believe this removes the key constraint that had prevented the stock from carrying its full MSCI weight.

Brokerages Remain Bullish

Brokers reiterated ‘Buy’ recommendation on Eternal following the development.

According to the brokers, Eternal has guided for $1 billion in adjusted EBITDA at the consolidated level by FY29. Its projections suggest quick commerce platform Blinkit could contribute around $500 million, while the food delivery business may generate about $425 million, with the balance coming from businesses such as Hyperpure and Going Out.

Swiggy Also in Focus

Eternal’s listed rival Swiggy also gained more than 5% after announcing that it had become an Indian-owned company.

In a stock exchange filing, Swiggy said aggregate foreign investment, including foreign direct investment, foreign portfolio investment and indirect foreign investment, had declined to 49.76% of its fully diluted equity capital as of July 6. Domestic ownership has consequently increased to 50.24%.

The company clarified that the change in shareholding does not alter its ownership or control structure, management or business operations.

Passive Inflows can Support Valuations

MSCI’s quarterly reviews are closely watched by institutional investors because any increase in index weight automatically forces passive funds to buy additional shares.

Earlier estimates by brokerages suggested India’s upcoming August MSCI review could generate billions of dollars in passive inflows through new inclusions and weight changes across several stocks. Eternal’s potential return to full weight is seen as one of the biggest individual beneficiaries of the exercise.

Apart from the expected passive inflows, investors remain constructive on Eternal’s long-term fundamentals, supported by steady growth in its food delivery business and the rapid expansion of Blinkit’s quick commerce operations. The possibility of a higher MSCI weight has provided an additional near-term catalyst, helping the stock outperform the broader market.

Source:

• https://www.nseindia.com/get-quote/equity/ETERNAL/ETERNAL-LIMITED