Zomato is acquiring Blinkit, a 10-minute grocery delivery startup, for $568.1 million as the money-losing food delivery firm looks to expand its offerings at a time when its shares are trading well below last year’s debut price and less than half of all-time highs.
The Gurgaon-headquartered firm that reached an agreement earlier this year to acquire Blinkit, TechCrunch previously reported — said in the message, on Friday, its shareholders approved the transaction. The deal marks a significant reduction in the value of Blinkit, which became a unicorn a year ago and raised about $700 million, mostly from equity. When the two firms agreed to the acquisition earlier this year, they valued the deal between $700 million and $750 million, TechCrunch previously reported.
The acquisition came as a relief to Blinkit, which has struggled for several quarters to raise funds from new or most existing investors. The SoftBank-backed startup, formerly Grofers, switched to instant grocery delivery last year.
Earlier this year, Blinkit closed many of its dark stores and scaled back business in many cities and vowed to focus more heavily on 10-minute grocery delivery. The startup said that if its orders are not delivered to customers within 10 minutes, it will not be served in those cities.
In Blinkit, Zomato will find a partner that can fuel its instant product delivery — or products in general, two areas where Zomato has previously tried to sink its teeth in but failed every time.
Blinkit competes with the younger, well-supported Instamart of Swiggy, which also has SoftBank among its investors, and YC Continuity-backed Zepto. Zomato, a company much older than all the other names mentioned above, competes with Swiggy, which is on the private market. more than double the cost of Zomato.
Swiggy who is Indian most valuable food delivery startup and hopes to go public next year, said earlier this year that invest $700 million in an instant delivery servicecalled Instagram.
Many investors questioned Zomato’s decision to acquire Blinkit and expand the market for instant grocery delivery services, analysts at HSBC said in a client report earlier this month. Analysts, however, justified the need for this acquisition for Zomato.
“In general, there are three models of the grocery delivery business. On the one hand, fast commerce (delivery in 10-15 minutes) with an extremely limited assortment (1-2 thousand SKUs), and on the other, the “full kitchen” offer (delivery on the next day) with 25-30 thousand SKUs. The former are “instinctive” purchases, and the latter are planned. In theory, instinctive shopping is less discount driven and more need driven, while planned shopping is more discount and assortment driven. Somewhere in between are 4-5k SKUs that serve both sides with certain benefits and trade-offs for both instinctive and planned buyers,” they explained.
“In our view, Zomato should try to build its grocery business closer to the middle of this structure and use technology to design and manage its dark stores to offer 4-5K SKUs with 10-60M TAT shipping. In our opinion, cross-selling to Zomato’s customer base, integrating the technology stack, and building a fulfillment infrastructure (as outlined above) are top priorities for Zomato in building a successful grocery business.”
Zomato, who was already an investor in Blinkit, began talks with a younger startup for a full acquisition last year, TechCrunch. previously reported, although at one point Dhindsa stated in a TV interview that it was not in merger/acquisition talks with Zomato.
From our last year review:
The leadership groups of Grofers and Zomato have been friends for a long time and began exploring the possibility of this investment earlier this year. Both firms are also open to the idea of Zomato acquiring a majority stake in Grofers in the coming quarters, though the decision has yet to be made and will not be fully explored until Zomato goes public, a source told TechCrunch.
Zomato, who acquired Indian food delivery business Uber early last yearhas told some of its big investors that it sees a future in which the Gurgaon-based firm has expanded far beyond the food delivery category, the source said, asking to remain anonymous as the talks are private.
The acquisition of Blinkit is the latest in a series of investments made by Zomato over recent quarters. He has also supported logistics startup Shiprocket, discovery platform Magicpin, fitness and wellness platform CureFit, ad tech startup Adonmo, food robot company Mukunda, and business startup UrbanPiper. The startup’s cash balance for the quarter ending March was about $1.6 billion.
Credit: techcrunch.com /