Food delivery platform Zomato's board gave a go-ahead to acquire Blinkit- initially Grofers, an e-commerce starp-up at its board meet today, as per the BSE filing.
The transaction valuing Rs 4,447 crore or close to $570 million is around 43% lower as against Blinkit's earlier valuation of just over $1 billion. In 2021, the company became a unicorn post receiving funding of $120 million from Zomato and Tiger Global.
In the shareholders' letter for Zomato''s proposed acquisition of Blinkit, Deepinder Goyal, founder & CEO, Zomato said, "We are proposing to acquire Blinkit, a quick commerce business in India and where we first invested in August last year. "This foray into the next big category is timely as our existing food business is steadily growing towards profitability", he adds.
The letter further states that over the last 4 year period, the company has growth at a CAGR of 86% to an adjusted revenue of Rs 55.4 billion ($710 million) while the adjusted EBITDA margin has improved from (153%) in FY19 to (18%) in FY22.
"We believe that 'super brands' will work better in India than 'super apps'. We will explore ways in which Blinkit can benefit from Zomato's large customer base (and vice versa in the long term)," Goyal says in the letter.
Going forward, both Zomato and Blinkit will function as separate brands and apps.
We are 1% done today, towards the larger journey we envision for ourselves in the long run.— Deepinder Goyal (@deepigoyal) June 24, 2022
Read here for more details and disclosures we have made to our shareholders as part of our proposal to acquire Blinkit: https://t.co/bePcRAZZum
As for the rationale for the deal, Deepinder says,"As a food company, we are already tapping into the large food delivery opportunity in India. In addition to that, we now also want to focus on quick commerce as a natural extension of our food delivery business. How is it a natural extension? Because it is also a hyperlocal business, just like food delivery. And, because it also caters to a need for quick delivery of products for our customers. Quick commerce will help us increase the customer wallet share spent on our platform and also drive higher frequency and engagement from our customers".
Last the shares of Zomato in trade on June 24, 2022 settled at Rs. 70.35 per share on the BSE.