Zomato intends to acquire Blinkit for Rs. 4447 crore
Zomato announced in a regulatory filing that it would offer up to 629 million shares at an allotment price of 70.76 per share.
BENGALURU: In order to take advantage of the rapidly expanding market for quick grocery delivery, food delivery network Zomato has agreed to purchase instant grocery company Blinkit for Rs 4,447 crore ($569 million) in an all-stock deal.
In order to close the acquisition, Zomato will issue up to 629 million shares at an allotment price of 70.76 per share, or 6.88 percent of the company’s ownership on a fully diluted basis. Prior to the announcement of the acquisition, Zomato’s shares ended at 70.35 on the BSE on Friday, up 1.15 percent.
For an additional $8 million, Zomato purchased HOTPL, a provider of warehousing and related services, from Blinkit. However, it stated that it would not purchase the B2B trading company since it no longer serves its strategic goals.
According to estimates from VCCircle, Japan’s SoftBank, the largest shareholder in Blinkit with a 46 percent investment will receive a 3.2 percent ownership in Zomato as part of the deal. Tiger Global Management will receive a stake of about 1.3 percent, while Sequoia Capital—an existing Zomato investor—will receive an extra 0.5 percent.
Other Blinkit (formerly Grofers) investors that stand to get new Zomato shares include Bennet Coleman & Co. Ltd., Yuri Milner’s Apollete Asia, and Korea’s KTB Ventures.
Grofers International, P.Te. The promoter company for the Grofers founders will receive 759 million shares, or more than 0.8 percent of Zomato. The Blinkit deal highlights how fiercely competitive and resource-intensive the rapid commerce industry is. One of the more than 40 unicorns made in India last year was Blinkit. A startup valued at $1 billion or more is considered a unicorn.
Lock-ins apply to the new shares that Zomato will issue. Zomato continued, “While the statutory lock-in requirement is six months, we have bargained for a 12-month lock-in for selling Blinkit stockholders.”
Additionally, the remainder of the shares attributable to Blinkit’s creator, Albinder Dhindsa, will be locked in for a year and the remaining half for two years. The shares associated with Blinkit’s exercised/vested employee stock options will be restricted for the required six months.
In a blog post, Zomato’s founder and CEO, Deepinder Goyal, stated that since the company’s initial investment in Blinkit last year, rapid commerce has been a strategic objective. “As customers have discovered amazing value in speedy delivery of groceries and other necessities, we have watched this industry grow dramatically, both in India and abroad.” He continued that the fact that this business works well with our main food company gives Zomato the chance to succeed in the long run.
Dhindsa will continue to be the company’s leader in rapid commerce. By August, the transaction is anticipated to be finished.
Given the increased rivalry in fast commerce, the purchase will provide relief to Blinkit. According to reports, Blinkit delayed some vendor payments, fired staff, and closed dark storefronts early this year.
According to Zomato, operating leverage and better execution caused Blinkit’s losses to reduce significantly between January and May.
Additionally, Blinkit said that closing some underperforming stores that were not scalable has also reduced losses. From over 450 in January, the number of its dark stores decreased to roughly 400 in May. The team will continue to evaluate underperforming stores to identify what is ineffective, according to the statement.
Adjusted Ebitda (earnings before interest, taxes, depreciation, and amortisation) break-even is anticipated for the company in fewer than three years. Additionally, it was noted that Blinkit’s revenue per order increased as a result of rising commissions and client delivery fees.
Blinkit reported revenue of 236.32 crore in FY22, up from 200 crore in FY21 and 165 crore in FY20, according to Zomato.
Zomato stated an upper bound of $400 million investment in fast commerce in 2022 and 2022 in its shareholders’ letter from February 2022. An advertisement stated, “We still believe that.”
The majority of this money will be used to cover funding losses in Blinkit for the remaining months of CY22 and CY23, “It read.
After receiving $120 million from Zomato and Tiger Global, Blinkit became a unicorn in August 2021. Following a year of discontinuing goods on the platform, Zomato announced last year that it had invested in Blinkit.
