Zomato to acquire Blinkit for ₹4,447 crore in all-stock deal
- Zomato will issue up to 629 million shares, amounting to an equity stake of 6.88% on a fully-diluted basis, at an allotment price of ₹70.76 per share, Zomato said in a regulatory filing
Food delivery platform Zomato has agreed to acquire instant grocery startup Blinkit for ₹4,447 crore ($569 million) in an all-stock deal, as it seeks to exploit a fast-growing market for quick grocery delivery.
As part of the deal, Zomato will issue up to 629 million shares, amounting to an equity stake of 6.88% on a fully-diluted basis, at an allotment price of ₹70.76 per share, Zomato said in a regulatory filing. Shares of Zomato closed at ₹70.35 on BSE on Friday, up 1.15%, before the acquisition was announced.
Zomato also acquired Blinkit’s warehousing and ancillary services business HOTPL for $8 million. It would, however, not acquire the B2B trading business as that no longer fits strategically into its plans, it said.
Japan’s SoftBank, the biggest shareholder in Blinkit with a 46% stake, will get around 3.2% stake in Zomato as part of the transaction, as per VCCircle estimates. Tiger Global Management will get around 1.3% stake and Sequoia Capital, already an investor in Zomato, will get an additional 0.5%.
Other investors in Blinkit (previously Grofers) who stand to get new shares in Zomato include Korea’s KTB Ventures, Yuri Milner’s Apollete Asia and Bennet Coleman and Co. Ltd.
Grofers International Pte, the promoter entity of Grofers founders, will get 759 million shares or over 0.8% stake in Zomato. The Blinkit deal underscores the hyper-competitive and cash-guzzling nature of the quick commerce business. Blinkit was among the more than 40 unicorns created in India last year. A unicorn is a startup valued at $1 billion or more.
The new shares to be issued by Zomato are subject to lock-ins. “While the statutory lock-in requirement is six months, we have negotiated for a 12-month lock-in for selling shareholders of Blinkit,” Zomato added.
In addition, half of the shares attributable to Albinder Dhindsa, founder of Blinkit, will be locked in for two years and the remainder will be locked in for a year. The shares attributable to the exercised/vested employee stock options of Blinkit will be locked in for the mandatory six-month period.
Deepinder Goyal, founder and chief executive of Zomato, in a blog post, noted that quick commerce has been the company’s strategic priority since last year when it first invested in Blinkit. “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. This business is also synergistic with our core food business, giving Zomato the right to win in the long term,” he added.
Dhindsa will continue to lead the quick commerce business. The deal is expected to be completed by August.
The deal will offer relief to Blinkit as competition has intensified in quick commerce. Blinkit reportedly laid off employees, shuttered dark stores and delayed some vendor payments earlier this year.
Zomato said Blinkit’s losses have narrowed sharply between January and May due to operating leverage and improved execution.
Blinkit also closed several unviable stores that were not scaling and that also helped bring down losses, it noted. Its dark store count fell to about 400 in May from more than 450 in January. “The team will continue to evaluate non-performing stores and learn what does not work,” it said.
The business is expected to become adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) break-even in less than three years. Besides, Blinkit’s revenue per order rose due to an increase in commissions and customer delivery charges, it added.
According to Zomato, Blinkit posted a revenue of ₹236.32 crore in FY22, up from ₹200 crore in FY21 and ₹165 crore in FY20.
In its shareholders’ letter in February 2022, Zomato had shared an upper bound of $400 million investment in quick commerce in 2022 and 2022. “We still maintain that,” it added.
“Most of this capital will go towards funding losses in Blinkit during the remainder of CY22 and CY23,” it said.
Blinkit turned unicorn in August 2021 after raising $120 million from Zomato and Tiger Global. Zomato’s funding in Blinkit last year also meant Zomato would be bringing groceries back on to the platform, after discontinuing it a year earlier.
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First Published:25 Jun 2022, 05:56 AM IST
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