Decoding Zomato-Blinkit deal and quick commerce’s next phase

Decoding Zomato-Blinkit deal and quick commerce’s next phase

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Aditi Shrivastava

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Aditi Shrivastava

104 reads

Zomato is going for a share-swap deal to buy Blinkit, which indicates that conserving cash is again a priority for India’s largest consumer internet companies. But for Zomato’s investors, this could mean a significant dilution of stake — all for entry in a business where numbers don’t add up yet

March 16, 2022

10 Min Read

When Grofers raised $100 million from Zomato in July last year, its employees started viewing the food delivery giant as their parent company. The technicalities — Zomato held only a 10% stake at this point — didn’t matter as they saw signs of an imminent change.

Soon, Grofers rebranded itself as Blinkit and shifted its business model from private label-focused, next-day dispatch of groceries to delivery in 10 minutes.

“You see when conversations about a pivot to quick commerce started to happen within the company sometime in May-June, the writing on the wall was clear. The business was being reset to build what Zomato wanted,” said an engineering team member at Blinkit, requesting anonymity. 

An acquisition made sense for both companies. Quick commerce was the only thing missing in Zomato’s game, while strategy-hopping Blinkit needed a fresh beginning after the nth stumble. However, the timing wasn’t right. 

Zomato knew it couldn’t execute a cash-bleeding quick commerce business through an M&A deal in the middle of its stock market debut. Plus, not everyone wanted to go through that journey. Grofers co-founder Saurabh Kumar exited the startup after eight years.

After nearly eight months of tentativeness, Zomato is set to acquire Blinkit in a stock-swap deal at a valuation of $700-800 million. This is lower than Blinkit’s $1-billion valuation last year.

Two factors prompted Zomato to push for the deal:

  • Blinkit was reportedly considering seeking fresh capital from outside investors. 
  • Zomato needed to make its position on quick commerce clearer.

We break down what the developments mean and how the quick-commerce space, where competition began to intensify last year, has shaped up. 

Acquisition Begins With A Loan 

Multiple factors make the deal complicated. Zomato informed the stock exchanges on Monday that it would extend a loan of up to $150 million to Blinkit at a 12% interest rate. Zomato has not formally announced or informed the stock exchanges about the deal. 

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