Zomato acquires Blinkit in an all-swap deal

zomato-acquires-blinkit

Indian Market
by 5paisa Research Team Last Updated: 2022-08-08T19:03:09+05:30

The one big piece that was missing in the Zomato product palate was a good Quick Commerce Franchise. The controlling stake in Blinkit could just about bridge that gap. Zomato is all prepared to take control of Blinkit, formerly known as Grofers, after it had extended a $150 million emergency loan facility to Blinkit. The Quick Commerce specialist, Blinkit, had been in a deep financial crunch in the last one year.

The deal between Zomato and Blinkit will be an all stock deal. The deal values Blinkit in the vicinity of $800 million, so down from being a Unicorn.

Zomato already owns about 10% in Blinkit, so that latest swap deal gives Zomato management and operating control of Blinkit.

Zomato can use this to supplement their food delivery business with home needs delivery in a short span of time using the existing infrastructure and franchise of Blinkit.

Quick Commerce or Q-Commerce is known to be a cash guzzler and the sharp increase in cash burn had pushed Blinkit into financial troubles in the last on year as it attempted things like 10-minute delivery of groceries.

That was one of the reasons why Blinkit, which was once already a Unicorn, lost the Unicorn status. In the start-up lingo. Unicorn is a start-up technology or ecommerce company with an indicative valuation of above $1 billion.

 

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For Zomato, this gives them a logical extension into the grocery and home needs business supported by a solid quick delivery model. Zomato anyways had plans to invest up to $400 million in developing its quick commerce franchise over 2 years and Blinkit perfectly fits into that plan.

For Blinkit, this is a life line so that they live to fight another day. Also, the support of a more stable balance sheet like Zomato gives the much needed comfort level.

In a way, it was Blinkit that pioneered quick-commerce in India with its pioneering 10-minute delivery model for groceries. This was handled through the concept of dark stores. Meanwhile, being a stock swap deal, there will also be some interesting changes in ownership.

For instance, Softbank which owns 40% in Blinkit, will now get about 4-5% in Zomato. Incidentally, Softbank is already one of the early backers of Swiggy.

The acquisition of Blinkit by Zomato, sort of underlines its commitment to the quick commerce franchise. After all, Blinkit pioneered 10-minute grocery delivery in India and is best positioned to support the future plans of Zomato.

In fact, Blinkit had quickly scaled up to record annualized gross merchandise value (GMV) of $450 million. With over 400 dark stores, Blinkit still remains a solid bet on the quick commerce space.

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