Stock Market Today: The Eternal Ltd formerly Zomato saw its share price decline more 3% in the intraday trades on Tuesday: While the company announced receiving approval for foreign ownership cap, analysts at Jefferies expect this may lead to MSCI weight cut

Eternal or Zomato announces approval for foreign ownership cap

Eternal Ltd, the new name for Zomato on Monday post market hours intimated the exchanges that shareholders of the Company have duly passed the special resolution for the item as set out in the Notice. The shareholders have approved a cap of up to 49.50% on the aggregate foreign ownership.

Zomato’s corporate name was recently changed to Eternal Limited, however the Zomato app and brand will stay the same.

Jefferies view on the development

Jefferies India Ltd in its 20 May 2025 report said that Eternal (Zomato) has secured an overwhelming majority of more than 99% shareholder votes in favour of the proposal to covert itself into an Indian Owned & Controlled Company (IOCC). This change as per Jefferies would provide flexibility to run a 1P (inventory) model for Blinkit. The capping is perhaps to protect from potential regulatory risks even while Q/C models (Quick Commerce, referring to its service called Blinkit) confirm to current law.

However Jefferies expects that this move may result in MSCI weight cut.

A MCSI weight cut refers to a decrease in a company’s weighting within the MSCI Emerging Market Index. This also leads to certain outflows as market participant adjust their ownership in a company shares.

MSCI rule as per Jefferies is that for a stock where there is a cap, if the FPI holding is within 3% below the maximum permissible limit , the stock comes under red flag list.

The exchanges/depositories would then release exact FPI holdings data every evening. If the FPI limit is breached, the foreign investor shall divest their excess holdings within five trading days from the date of settlement of trades, by selling shares only to domestic investors

Jefferies expectation on MSCI weightage and outflows

According to MSCI, switching to IOCC would likewise result in a weight reduction or total exclusion .

If Foreign ownership limit not breached prior to implementation: In such a case, based on MSCI’s foreign ownership room calculation, Eternal could either face immediate exclusion from the MSCI index—triggering estimated outflows of approximately $1.3 billion or there would be a reduction in index weight, which as per Jefferies would be leading to outflows of around $650 million during the August-25 rebalancing

If the Foreign ownership limit was breached before implementation, this would result in a definitive exclusion from MSCI. However, the impact on liquidity from FPIs remains uncertain and is hard to quantify, added Jefferies

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