Why Eternal Ltd (formerly Zomato) Might See $840 Million in Outflows? Explained.

Eternal Ltd, the company we once knew as Zomato, may soon face a big challenge — passive outflows of nearly $840 million (~₹7,150 crore). What’s going on? Let’s break it down: What happened? 🔻 The company reduced the foreign ownership limit (FOL) from 100% to 49.5%. This means foreign investors (like big global funds) can now own less of the company. Why does this matter? Many foreign investors track global indices like FTSE and MSCI. These indices include stocks based on how "investable" they are for foreign investors. Since Eternal's FOL was slashed, its investability has dropped, and its weight in these indices is being cut. When? • FTSE will reduce Eternal’s weight on May 27, triggering around $380 million in outflows. • MSCI is also expected to cut its weight, possibly leading to another $460 million in outflows. Why does this lead to selling? Index funds that follow FTSE and MSCI have to adjust their holdings. If Eternal's weight goes down, they must sell some of their shares to match the new weight. That’s where the $840 million selling pressure comes from. Impact on the stock: Even though Eternal’s stock rose 3.7% to ₹237 recently, it’s down 15% this year. These forced outflows could add to short-term selling pressure. Takeaway: When a company limits how much foreign investors can own, global index funds cut their stake, and this can lead to large, sudden sell-offs — even if the company’s business is doing fine. Summary: Eternal Ltd is facing a big wave of passive selling due to a cut in its foreign ownership limit. As global indices adjust their weightage, nearly $840 million could flow out of the stock — a move driven more by index rules than company performance.