Logistics platform Zomato has acquired Blink Commerce in a deal valuing the quick-commerce platform at $626 million, as it ventures into a fiercely competitive sector where rival Swiggy is already building a formidable business.
At the share-swap consideration, the valuation marks a discount of nearly 37.4 percent as compared with Blink Commerce’s unicorn, or billion-dollar valuation, status reached in June last year.
Zomato already owns a little over 9 percent of Blink Commerce, which operates the quick-delivery platform Blinkit. It has now paid nearly $568 million (Rs 4,447.48 crore) to acquire the remaining stake in Blink Commerce.
Zomato will issue more than 628.53 million shares priced at Rs 70.76 for the share swap, the company informed the stock markets on Friday after market hours.
“This business is also synergistic with our core food business, giving Zomato the right to win in the long-term,” Deepinder Goyal, CEO and Managing Director of Zomato, said in a blog post.
“Quick commerce has been our stated strategic priority since the last one year,” Deepinder explained. “We have seen this industry grow rapidly both in India and globally, as customers have found great value in quick delivery of groceries and other essentials.”
For Blinkit CEO Albinder Dhindsa, the acquisition marks a return to Zomato, where he was the head of international operations until 2014.
Investors tracking Blinkit, previously known as Grofers, over the past seven years are sceptical, especially as the company had originally begun as a contemporary of online grocer BigBasket, indulging in aggressive discounts.
An ecommerce investor in Mumbai said the Blinkit acquisition is in stark contrast with Reliance Retail’s $200-million investment in Dunzo that happened in January.
“A $200-million investment in Dunzo is a drop in the ocean for Reliance. It may not even merit a mention at a Reliance board meeting,” this investor said, requesting anonymity. “But for a loss-making Zomato to acquire a loss-making Blinkit makes Blinkit half the agenda of a Zomato board meeting.”
Zomato shares ended Friday trading about 1 percent higher at Rs 70.35 apiece on BSE amid buzz of the Blinkit acquisition.
Zomato first disclosed its interest in Grofers India and its affiliated entities in its prospectus dated July 19, 2021. The following month, it acquired a 9.25 percent stake in Grofers and a 9.27 percent in Hands On Trades Pvt. Ltd. for an aggregate amount of $100 million.
Grofers reported operational revenue of Rs 2,725 crore in fiscal year 2021, growing 27 percent over the previous year. But operating loss increased 41 percent to nearly Rs 2,840 crore, per regulatory filings in Singapore, where the holding company is headquartered.
In fiscal year 2022, Zomato reported total income of Rs 4,687 crore, with an operating loss of Rs 1,518 crore. It listed on the stock exchanges on June 23, 2021.
Following Zomato’s first investment in Grofers last year, Grofers got incorporated as Blink Commerce in December, with the brand name ‘Blinkit’, to focus on quick-commerce.
HSBC Global Research analysts, while agreeing the merger was “unlikely to provide operational synergies in the near term to either company,” cited other potential benefits.
“Blinkit would get access to Zomato’s 15-million monthly transacting users and nearly 60-million monthly active users,” they said in a report dated March 16. “This could significantly reduce Blinkit’s customer acquisition cost and improve the stickiness and repeatability of ordering across grocery and food delivery.”
Last month, in a letter to shareholders, Zomato CFO Akshant Goyal disclosed that CEO and Managing Director Deepinder Goyal had invested $94,000 in Grofers in 2015. “(Deepinder) exited that investment in January this year (at a price per share of the round prior to when Zomato invested),” Akshant said.
“We stay committed to not letting this be a factor in any of our investments, and run a tight governance process with the support of our strong and independent board,” he added.
In the same shareholder letter, Deepinder said Blinkit had grown well over the previous six months, and had significantly reduced its operating losses.
“We continue to remain bullish on quick commerce, especially given how synergistic it is to our core food-delivery business, and are excited with the progress that Blinkit has made in this space,” Deepinder said then.