Zomato proposes to acquire Blinkit for Rs 4,447 crore

Zomato to acquire e-grocery startup Blinkit (formerly Grofers) for Rs 4,447 crore, the company announced in a blog post on June 24, 2022.  The company, which already has nine percent stake in Blinkit, proposes to fully acquire the  e-grocery startup along with  the warehousing and ancillary services business of Hands on Trade Private Limited (HTPL) for a lumpsome amount of  Rs 4,508.2 crore. As per the company, Zomato will pay Rs 60.7 crore in cash for acquisition of HOTPL Identified Business.

Quick commerce has been a stated strategic priority for Zomato since last year,  Deepinder Goyal, CEO, Zomato, said. “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.

Additionally, Zomato is is also proposing to create a new Zomato ESOP pool, equivalent to the combination of ungranted ESOP pool and unvested ESOPs of employees of the proposed acquisition targets (0.37% equity dilution on fully diluted basis).

The company claims that in the month of May 2022, Blinkit did gross order value (GOV) of Rs 402.8 crore, posting a 36% rise when compared to January 2022. In result, the company saw a 162% rise in revenue in May to Rs 58 crore as opposed to Rs 22.1 crore in Jan.  The company’s losses also recorded a decline in may when compared to Jan 2022. For Akshant Goyal, CFO, Zomato, the losses have come down owing to operating leverage and improved execution. “As the GOV per day, per store goes up, losses come down given the high operating leverage in the business. In addition, revenue per order has gone up due to an increase in commissions and customer delivery charges. Blinkit has also shut down a number 0f unviable dark stores, which were not scaling. This has also brought the losses down. The dark store count has come down to about 400 in May 2022, as compared to 450+ in January 2022. The team will continue to evaluate non-performing stores and learn what does not work,” he added.

It is to be noted that the proposed acquisition targets have a net debt of Rs 673.1 crore as on the date of signing. Of the total gross debt on the books of the proposed acquisition targets (Rs 1254.7 crore, including accrued interest), Rs 1132.8 crore (including accrued interest) is payable to Zomato. The implied equity value of the proposed acquisition targets is Rs 4945.8 crore and the implied enterprise value is Rs 5618.9 crore at the prescribed referential allotment price of Rs 70.76 per share

Blinkit was rebranded from Grofers after a pivot to quick commerce last year. Their business model was next-day grocery delivery. Blinkit was the first company in India to get into quick commerce. Blinkit’s business pivoted to 100% quick commerce in January 2022, led by Albinder Dhindsa of Grofer’s. As per Goyal, post the acquisition the company will continue to be run by Dhindsa and have separate apps. 

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