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DELHI/BENGALURU : Zomato Ltd is set to take control of Blinkit after the food aggregator extended a $150 million emergency loan facility to the quick commerce startup, two people familiar with the deal said.

The transaction involves an all-stock deal that values Blinkit between $700 million and $800 million, the people said on condition of anonymity. The deal value is significantly lower than the unicorn status Blinkit achieved after getting more than $120 million from Zomato and investor Tiger Global Management, Mint reported in August. Zomato owns about 10% of Blinkit.

The pared-down valuation indicates Blinkit (run by Grofers India Pvt. Ltd) may be struggling to sustain the 10-minute delivery of groceries. The loss of the unicorn tag in less than a year may also dampen investor euphoria around cash-guzzling quick-commerce startups.

In a late regulatory filing on Tuesday, Zomato said it would extend a $150 million loan to Blinkit in one or more tranches. “This loan will support the capital requirements of Grofers India Pvt. Ltd in the near term and is in line with our stated intent of investing up to $400 million cash in quick commerce in India over the next two years," it added. However, Zomato didn’t disclose whether it planned to acquire Blinkit.

The quick-commerce company, which pioneered the 10-minute delivery of groceries with the help of so-called dark stores, was one of the more than 40 unicorns, or startups valued at more than $1 billion, created in India last year.

Zomato’s takeover of Blinkit is expected to be completed in 60 days, the people said. SoftBank, which had a 40% stake in Blinkit, will get a 4-5% stake in Zomato as part of the transaction while Tiger Global and Sequoia Capital will get additional shares in the entity, they said, without disclosing further details.

Emails sent to spokespeople for Zomato, Blinkit, SoftBank, Sequoia and Tiger Global did not elicit an immediate response.

Blinkit’s down round indicates that startups are increasingly finding it difficult to raise funding on favourable terms amid the geopolitical tensions in Europe and major central banks starting to wind down ultra-easy monetary policies and raise interest rates.

The developments came after a euphoric 2021 when a record number of Indian startups became unicorns. Many of India’s hottest startups went public, including Zomato, which became the first unicorn to be listed in India.

After achieving the unicorn status last year, Grofers co-founder and chief executive Albinder Dhindsa said in an interview that the company is pivoting to making all deliveries under 10 minutes. It rebranded itself to Blinkit to focus on its move to quick commerce in December. Meanwhile, new and older startups also joined the quick-commerce bandwagon as a 10-minute delivery service became the buzzword. For instance, Zepto, a 10-minute grocery delivery app founded by 18-year-old dropouts from Stanford University, raised $100 million in a Series C funding round led by American technology startup accelerator Y Combinator’s Continuity Fund in December. This funding round came 45 days after the company announced a $60 million fundraising in November. Earlier this year, Ola rebranded its quick commerce business as Ola Dash.

With competition rising, trouble soon started to plague Blinkit. The company laid off employees, shuttered dark stores, and delayed some vendor payments in the past weeks, the Moneycontrol website reported.

By planning to acquire Blinkit, Zomato has underlined its commitment to the quick-commerce space. In fact, its investment in Blinkit last year also meant Zomato would be bringing groceries back onto the platform after discontinuing it in 2020.

In its third-quarter earnings report, Zomato said it is aggressively growing the quick-commerce segment and will invest $400 million over the next two years in the category.

“Blinkit is the closest to how we all know the quick-commerce business today. Blinkit pioneered 10-minute grocery delivery in India, post our $100 million investment in August 2021," it noted.

It said that Blinkit scaled rapidly to $450 million annual run-rate gross merchandise value (GMV) (January 2022 annualized) and now operates over 400 dark stores across 20 cities in India.

Deepinder Goyal, co-founder and CEO of Zomato, sold his stake in Blinkit to Tiger Global Management in February.

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