Blinkit on Zomato Plate: Board OKs Rs 4,447cr Deal

Food delivery app Zomato’s board has approved its acquisition of quick commerce startup Blinkit (formerly Grofers) for 4,447 crore (about $570 million) in an all-stock deal.

The transaction value is 40% lower than Blinkit’s last valuation of just over $1 billion. As per discussions held earlier, the deal was pegged at $700-750 million.

Blinkit had become a unicorn — or a privately held company with a valuation of $1 billion or more — last year following a $120 million funding round from Zomato and New York-based investment firm Tiger Global.

In total, Blinkit has raised $692 million so far from investors including Japan’s SoftBank, DST Global and Tiger Global, according to data from industry tracker Tracxn. Zomato currently holds about 9% in Blinkit.

According to the deal, the shareholders of Blinkit will get about 7% in Zomato at 70.76 per share.

The transaction is expected to close by early August, Zomato informed BSE after its board meeting on Friday.

It is subject to customary shareholder and stock exchange approval, chief financial officer Akshant Goyal said in a letter to shareholders. “This foray into the next big category (quick commerce) is timely as our existing food business is steadily growing towards profitability,” Zomato’s founder and chief executive Deepinder Goyal said in a note to shareholders on Friday.

“Zomato has grown at a CAGR of 86% in the last 4 years to an adjusted revenue of $710 million, while the adjusted Ebitda margin has improved from (153%) in FY19 to (18%) in FY22,” he said.

Zomato defines adjusted Ebidta as Ebidta less share-based payment expenses.

Goyal has said previously that the restaurant aggregator platform was “very conscious” about not overpaying for Blinkit in the event of a deal.

“We are very conscious that we do not have to overpay for any M&A (merger and acquisition), and we have strong governance processes. We will follow the process and not make any mistake on that front,” he said during an investor call in May, when asked how Zomato would value Blinkit.

Blinkit’s investors must compulsorily hold Zomato’s shares for 12 months.

In addition, 50% of the shares attributable to Albinder Dhindsa, founder of Blinkit, will be locked in for 24 months, while the rest will have a lock-in period of 12 months.

Saurabh Kumar, cofounder of Blinkit, left the firm last year to start a new venture but continues to be a shareholder in the company.

It is not clear if the 24-month lock-in period will be applicable to his stake in Zomato as well.

Shares attributable to the exercised or vested employee stock ownership plan (Esop) of Blinkit will be locked in for the mandatory six months.

SoftBank and DST Global are also investors in Zomato rival Swiggy.