Blinkit to merge with Zomato in an all-stock deal, to be valued at $700-800 mn

SoftBank-backed quick commerce start-up Blinkit, earlier known as Grofers, has signed a merger deal with food delivery unicorn Zomato, sources privy to the development told Business Today. 

The deal will value Blinkit between $700-800 million, stripping down the unicorn valuation that the online grocery delivery firm gained last year when it raised capital from Zomato. It will be an all-stock deal where Blinkit's investors will gain proportionate shares in Zomato. The deal is likely to be completed in 60 days time.

The development emerge amid reports of Blinkit delays vendor payments, shuts down dark stores, and lays off workforce. 

The companies have signed a term sheet about two-three weeks ago and are preparing to file an application with the Competition Commission of India for approval of the transaction. 

In August 2021, Zomato had received CCI approval for a $100-million investment for 9.3 per cent stake in Blinkit.

Announcing its third quarter earnings last month, the food aggregator said it is aggressively growing quick commerce segment and will invest $400 million over next two years in the category. The company said that the business growth in one of its portfolio companies, Blinkit, is driving this investment confidence. Notably, Deepinder Goyal, Zomato's Founder and CEO, sold all of his personal shares in Blinkit days before the announcement. 

"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. Since then, the platform has scaled rapidly to $450 million annual run rate GMV (January 2022 annualised) and now operates with 400+ dark stores across 20 cities in India. 100 per cent of Blinkit's business now is in quick commerce format with a median delivery time of ~12 minutes. Delightful customer experience is leading to high customer retention, ordering frequency and willingness to pay for the service," the company said in its Q3 earnings report.

"It reminds us of the food delivery category a few years ago when many platforms competed over a large and growing market but ultimately only the few who delivered exceptional experience to their customers survived. We are becoming increasingly confident in our decision to invest behind market leadership here with healthy unit economics. As a result, we are updating the upper bound of our potential investments in this category to $400 million cash over the next two years," Zomato said in its release. 

Both Swiggy and Zomato are aggressively chasing an early dominance in the quick commerce market share, which is predicted to be the next big opportunity in the larger foodtech sector. Swiggy recently said it will invest $700 million to grow Instamart. The merger will strengthen Zomato in its battle with arch rival Swiggy, and might even positively impact its stock price which has been on a downward slide for some time now. 

Email queries send to Blinkit and Zomato did not elicit a response until the time of publishing this report. 

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