Food delivery firm Eternal, previously known as Zomato, is likely to face passive outflows amounting to $840 million, as global index providers FTSE and MSCI prepare to significantly reduce the stock’s weighting in their indices.
The decision comes in response to a cut in the Foreign Ownership Limit (FOL), leading to a drop in investability weighting within the FTSE All World Index from 82.74% to 49.5%.
The limit restricts how much of a company’s shares foreign investors can own. When authorities lower this cap, index providers like FTSE and MSCI reduce the stock’s weight in their indices to reflect the decreased availability for global investors.
According to a statement issued by FTSE, Eternal will continue to be part of the index, with the total number of issued shares remaining unchanged at 9,064,966,438.
The revised weighting will take effect at the start of trading on Wednesday, May 28.
“Unlike headroom-related reductions (which are implemented in a phased manner), a direct FOL cut may lead to a full investability weight reduction in a single step during this interim event. We expect outflows of $380 million from this downward revision,” a note by IIFL Alt Desk said.
MSCI has also announced a change in the Foreign Inclusion Factor (FIF) for Eternal, alongside its May review, which could lead to an additional outflow of $460 million, according to IIFL Alternative Research Desk. These adjustments will take effect from May 30, 2025.
Eternal’s stock has come under pressure following a shareholder decision where 99% voted in favor of capping foreign ownership. As a result, analysts at Jefferies estimate total potential outflows of up to $1.3 billion due to these index-related changes.
