Eternal faces heavy selling as FTSE, MSCI slash weightage; $840 million outflows likely

The dip comes after index giants FTSE Russell and MSCI prepared to reduce Eternal's weightage in their portfolios due to a significant regulatory change.

Eternal shares

Shares of Eternal Ltd. — formerly known as Zomato — slumped over 3% during early trade on Monday (May 26) following expectations of massive passive outflows from global funds. The dip comes after index giants FTSE Russell and MSCI prepared to reduce Eternal's weightage in their portfolios due to a significant regulatory change.

Foreign ownership limit slashed to 49.5%

The root of the shake-up lies in the sharp reduction of Eternal's foreign ownership limit (FOL), which was cut from 100% to 49.5%. The lowered cap now restricts how much foreign investors can hold in the company, triggering a recalibration of its representation in global indices.

"The reduction in FOL leads to a direct and immediate downgrade in investability weight," noted IIFL Capital Services.

FTSE leads the rebalancing; MSCI to follow in May review

On Friday, FTSE Russell announced a change in Eternal's investability weight, affecting several of its global indices — including the FTSE All-World Index, FTSE MPF All-World Index, FTSE Global Large Cap Index, and FTSE Emerging Index.

FTSE's rebalancing alone could result in passive outflows of $380 million, or around Rs 3,235 crore, according to IIFL. MSCI's upcoming May review is also likely to incorporate the FOL cut, potentially leading to another $460 million (approximately Rs 3,917 crore) in passive outflows.

At 9:25 am, Eternal's shares were trading at Rs 229.79 on the NSE, down 3.3% from the previous close.

Financial performance: Profit tumbles, revenue soars

Eternal reported a 78% year-on-year decline in consolidated net profit to Rs 39 crore for Q4 FY25, compared to Rs 175 crore in the same quarter of FY24. However, revenue from operations saw a strong 64% YoY jump, reaching Rs 5,833 crore in the March quarter.