CASE STUDY OF ZOMATO’S ACQUISITION OF BLINKIT

A CASE STUDY
OF
ZOMATO’S
ACQUISITION OF
BLINK-IT

SUSHANTH ARAVA
E-mail- id : aravasushanth@gmail.com

CONTENTS :

1. PRE-FACE …………………………………………………………...3
2. BACKGROUND……………………………………………………3-8
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 CASE STUDY OF ZOMATO’S ACQUISITION OF BLINKIT

- ZOMATO
- BLINKIT
- DEAL OBJECTIVES
- OPPURTUNITIES
3. DEAL STUCTURE…………………………………………………8-9
4. VALUATION AND NEGOTIATION……………………………...9-11
5. KEY METRICS AND SYNERGIES……………………………...11-14
6. POST ACQISITION SCENARIOS……………………………….14-16
7. CONCLUSION……………………………………………………….17
8. RERFERENCES……………………………………………………...18

PREFACE;
On June 24, 2022, Zomato announced the acquisition Blinkit for a total of Rs 4,447
crores in equity. According to Zomato's letter to the BSE, the board has approved

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the purchase of up to 33,018 equity shares of Blink Commerce Pvt Ltd from its
shareholders for a total purchase price of Rs 4,447.48 crores. For Rs 60.7 crores,
Blinkit sold HOTPL (Hands on Trade Private Limited), a business that offers
warehousing and related services, to Zomato's Hyperpure, a business-to-business
provider. It is stock-to-stock deal, ten percent of Zomato shares will be distributed
to Blinkit shareholders. Earlier in 2021, Zomato invested $100 million in Blinkit,
acquiring a 9% stake.

BACK-GROUND;
Zomato :

Zomato is an online food delivery service company. In 2008, Deepinder Goyal and
Pankaj Chaddah founded the food tech unicorn. Over the years, Zomato has
expanded rapidly currently more than 1000 cities and town across India.
The company has maintained its position as a major player capturing over 50%
market share due to its distinct and resilient business and revenue model, as well as
its clearly defined organizational structure. Affordability, ease of access, and
variety are some of the elements that have contributed to Zomato's success and
fostered customer trust over the years. Zomato is still looking for new and creative
ways grow its success.

Zomato's current business strategy includes transaction fees for ordering and
delivering food, fees for listing and advertising restaurants on the Zomato platform,
a subscription service called Zomato Pro, and a new initiative called Hyperpure,
which targets eateries that sell high-quality meats and groceries. Although it
suffered from COVID-19 and reported Rs. 1993 crores in March 2021, its revenue
increased from a respectable 446 crores in 2018 to an impressive 2604 crores in
2020. Zomato raised money from several venture capitalists as it expanded,
including Info-edge, which is still its largest investor to this day. Zomato has
mostly used this money to buy a few other businesses, with Uber-Eats being its
biggest acquisition at 15,250 million Indian rupees.

In FY20, Zomato reported revenue of ₹2,486 crore, but its losses broadened to
₹2,451 crore. Despite being a losing business, its valuation is significantly higher
than that of its international competitors. At first, tech-based businesses like
Zomato required significant investments, but as unit economics began to change,
they had to take advantage of India's expanding opportunities.

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After 11 years of its inception, Zomato went for an IPO, which will raise ₹9,350
crore at the top of the price band of ₹72-76, is one of the largest issues in India
after the covid outbreak last year. At this price, Zomato will be valued at ₹59,623
crore, ranking 78th among listed firms in India by market value.

Zomato has not yet achieved profitability. Nonetheless, this cutting-edge digital
platform has significant growth potential and is currently developing due to
favorable macroeconomic conditions, shifting demographics, and increased use of
tech infrastructure.

With all the investment flowing and turning into profitable is one of their primary
agenda post-ipo. Zomato started acquiring more and more companies, some of them
that are directly helping them better their services so that they can be undefeatable in
this industry.
Here, is a list of few - Lunchtime, Obedovat, NexTable, Cibando, Sparse Labs,
Gastronauci, MenuMania, UrbanSpoon, Runnr, and MapleGraph are the subsidiaries
of Zomato.

In 2021, Zomato acquired a 9% share in one of the major quick-commerce company

in India – BLINKIT. Zomato sought out greater potential in the growth of this Indian
quick-commerce and to stand-out in its food-tech race, it acquired blink-it in a stock-
to-stock deal in 2022.

BLINKIT :

Formerly Grofers, Albinder Dhindsa and Saurabh Kumar founded Blinkit in

December 2013. They joined forces to enter the grocery delivery industry. Their
objective was to resolve the issues brought on by the unorganized nature of the
industry, both from the merchant and customer perspectives. The startup first
conducted a pilot in Delhi NCR before expanding to other Indian cities.
They entered expansion phase in 2015, into multiple cities across India, and they
also enhanced their operations into innovating hyperlocal delivery model - by
partnering with local stores and optimizing delivery routes, managed to scale
operations while maintaining fast and reliable service.
In 2021, Blinkit started turned to a quick commerce- grocery delivery platform,
guarantees to deliver a selection of nearly 7,000 products within a remarkable 10-
minute timeframe. With operations in over 30 cities across the country, Blinkit
carefully selects retailers within a 2-kilometer radius to enable quick delivery.
Blinkit boasts more than 60 partner stores in Delhi alone. Orders can now be
packed within 2.5 minutes of placement, increase in operational efficiency brought

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about by improved in-store planning and technology developments and an under

10 min delivery to the customer.

Blinkit oversees several phases of the delivery process from the warehouse to the
customer's door, including logistics, delivery partners, suppliers, vendors,
technology, and merchant partners. This is where most of the revenue is generated,
despite the complexity of these operations.

The Blinkit mobile app seamlessly integrates with local retailers and brands when
a customer places an order. With every transaction, Blinkit receives a commission
that can range from 8% to 15%. Blinkit is also making calculated investments in
private brands, which have already started to produce sizable income streams.
Also, it has other major sources of revenue delivery fees, subscription charges,
advertising revenue and also by partnerships with other brands.

The pandemic accelerated demand for e-grocery services, bringing in a new wave
of customers., the company began burning money at a rapid clip to compete with
other players like Zepto and Swiggy Instamart. Blinkit is leading the quick-
commerce race almost grabbing over 34% market share with other leading
companies – Zepto 23%, Swiggy Instamart 31% and others 13%.

Even though, Blinkit is a loss-making start-up draining several millions every year.
In 2022 quick commerce delivery firm Blinkit is learnt to have shuttered 50 of its
dark stores across the country, resulting in hundreds from its workforce, including
dark store managers, pickers and delivery workers losing their jobs. This comes as
the company looks for measures to reduce its burn rate amid a cash crunch and
delayed payments to vendors for at least the last two months.
Until they start charging users a delivery fee or introduce a membership
subscription plan, it is unlikely that they will manage to improve finances from
operations. That could be a potential reason behind why investors are hesitant to
pump in additional capital into the company.
In 2022 a severe cash crunch led Zomato to lend $150 million in as convertible
debt beginning of 2022.

OBJECTIVES ;

Zomato is one of the biggest companies in the food delivery market. The
acquisition of Blinkit has the potential to expand its hyperlocal delivery
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capabilities. Quick commerce, which involves delivering groceries in less than 30

minutes, can provide a sizable free profit pool for companies like Zomato that have
developed substantial on-demand service expertise over the years.

Building internally would have cost Zomato negligible time and money. Zomato
chose to buy rather than build BlinkIt because of its capabilities, which include an
integrated tech platform, an optimized dark store network, business scale, and
noteworthy third-party relationships. Additionally, BlinkIt's team will offer the
bandwidth and vast experience needed to operate efficiently in quick commerce
without compromising the caliber of Zomato's current team dedicated to the food
delivery business.

Blink-it addition to its vast hyperlocal network and broad customer base, extensive
dark store network, relationships with brands and sellers, and optimized tech stack
would all contribute to its successful quick-commerce venture.

Thus, this opportunity of integrating two top companies in one in quick-commerce

and delivery partner services ,made it major big buy of acquisition of blink-it in its
for 568Mn USD in 2022.

OPPURTUNITIES of expansion for Zomato ;

Quick-Commerce game :

Amazon Pantry, Big Basket, Grofers, Swiggy, and other companies dominated the
e-commerce grocery market, which Zomato aimed to enter. The company, which is
already a global restaurant aggregator and food delivery company, repeatedly
attempted to enter the quick commerce grocery and essentials delivery market but
was unsuccessful. Zomato launched a 45-minute grocery delivery service in April
2020 in an effort to alleviate the COVID-19-induced lockdown that was forcing all
restaurants to close.

However, the business started delivering meals again after the lockdown was lifted.
In July 2021, Zomato returned to the market, but in September 2021, it ceased
operations due to logistical issues. Zomato gained a significant competitive
advantage by purchasing Blinkit.

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1) Increase customer wallet share , following its acquisition of Blinkit,

Zomato's customer wallet share will rise. Along with standard restaurant
food orders and Zomato's Hyperpure, a B2B supplier for restaurants, the
company also plans to add a Blinkit and Hyperpure tab to its app, which will
allow users to order groceries and other necessities.
Zomato has been attempting to consolidate all its subsidiary platforms under
one roof in an attempt to monopolize the customer base.

2) Integrated fleet-services, The decision to share a delivery fleet between the

two companies will allow Zomato to reduce its delivery costs. While
Zomato's regular food deliveries are heavily reliant on factors like distance
and quality assurance, Blinkit, which is powered by Quick Commerce, has a
time-bound delivery pattern. Additionally, the number of orders placed per
hour is higher than that of regular food delivery orders due to time-bound
delivery. The company's goal is to decrease the cost of operating a better
food delivery business over time by investing in the development of the
ecosystem surrounding the business.

3) Gross Order Value (GOV) , Zomato's profitability index will rise as the
online retailer deals with more consumer packaged goods (CPG) brands.
Due to its e-commerce-driven business model, Zomato's gross order value
(GOV) will rise over time, boosting its gross profit margins. According to
Deepinder Goyal, co-founder and CEO of Zomato, "Blinkit's GOV is rapidly
overtaking Zomato's GOV in some important markets, indicating that quick
commerce will add a significant new addressable market to our business in
the long term." A fast-moving consumer goods (FMCG) company claims
that "Quick commerce platforms that facilitate deliveries in 10–20 minutes
are growing 20–25% faster in volumes than those that make deliveries in
four hours or longer."

CHANCES of Survival for Blinkit ;

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There are three fundamental components to the quick commerce operational

model: "dark stores," "overpaid delivery boys," and
"efficient delivery management system!"

• Dark Stores: Due to financial difficulties, Blinkit was beginning to postpone

payments to its suppliers. After changing its name from Grofers to Blinkit, the
company found itself in a serious financial bind, which in turn affected how the
business operated. As a result, the company had to close about 50 dark stores, and
since there was only one dark store within a 6-7 km radius rather than one every 2-
3 km, operating costs went up.

• Overpaid Delivery Boys: Fast delivery is a must for the fast *commerce industry,
which necessitates delivery boys' constant availability. Many employees were laid
off because of Blinkit's severe financial crisis, which prevented the company from
hiring the necessary staff.

• Delivery management system: Blinkit failed to achieve an effective delivery

management system due to the aforementioned factors, completely negating the
goal of speedy commerce.

Thus, these factors led to severe situations inside the company and its operations.
A major funding is due to run ahead in the race. As Zomato is already pioneer in
those services, thus integrating all those services will be a gamechanger for blinkit,
only which can turn things for blinkit and make it profitable.

DEAL STRUCTURE ;
The Zomato Acquisition of Blinkit is quite a friendly takeover, as already holding
over 9% stake in the company and lending an another $150mn into the company,
as the company got into turbulence and blinkit is looking out for the contingency
plans to not shutting down, at the same time Zomato took the opportunity and got
the company at severe discount to the previous valuations.

In an all-stock deal, food delivery platform Zomato has agreed to pay ₹4,447 crore
($569 million) to acquire instant grocery startup Blinkit in an attempt to capitalize
on the rapidly expanding market for quick grocery delivery. At an allotment price

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 CASE STUDY OF ZOMATO’S ACQUISITION OF BLINKIT

of ₹70.76 per share, Zomato will issue up to 629 million shares as part of the
agreement, which equates to a fully diluted equity stake of 6.88%. Zomato also
acquired Blinkit’s warehousing and ancillary services business HOTPL for $8 million.
The company kept the Management running after takeover, and also infused
millions of dollars into the operations after the acquisition. And plans to take ahead
of its competitors Swiggy’s Instamart, Relaince’s Dunzo and Zepto in the quick-
commerce race in India.

VALUATIONS AND NEGOTIATIONS;

BLINKIT :

The company is a loss-making startup from start, so it is impossible to do valuation

major valuations methods like discounted cash-flows, comps comparable. The best
type of methods to consider for these start-ups is venture capital method.

This approach is a preferred choice for venture capital firms and should be taken
into consideration if you require a pre-revenue valuation. Additionally, it
represents the attitude of investors who intend to leave a company in a few years.
Post-Money Valuation = Terminal Value ÷ Anticipated ROI
Blink-it, formerly Grofers is a startup which undergone to G-series rounds of
funding after since inception. It started with a seeding capital of $502,000 by Peak
XV Partners in 2014. Through the years, Softbank group became the major
investor in the company supplying a total of $350M. Blinkit's largest funding
round was a Series F round held on Dec 18- 2018, for $221M.

Blinkit has total 15 funding rounds.

 9 Late-Stage rounds

 3 Debt rounds

 2 Early-Stage rounds

 1 Seed round
Blinkit has raised a total funding of $757Mn over 15 rounds.

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With the last funding of Blinkit, raised $150M in its latest funding round, which
was Conventional Debt from Zomato round held on Mar 11, 2022.

that the estimated valuation of Blinkit would be between $750 and $800 million,
which is significantly less than the unicorn status it attained with the funding round
in which Zomato took part 2021 August.

Through the end of all the funding rounds, by 2022 Blinkit estimated to be valued
of $932 Million post-Valuation.

NEGOTIATIONS. :

Despite growing competition in this market, Blinkit's severe financial crisis

highlights the unviability of the quick commerce model. Because of this, Zomato
has decided to lend Blinkit $150 million to help with its short-term capital needs.
AS the unsuitability pre-vailed which needed a immediate survival plans and
investors need a exit – Less than a year after investing $100 million in Blinkit for a
9.3% stake, Zomato is reportedly in talks to merge with the online grocery
company in an all-stock deal. Blinkit shareholders will get a 10% stake in Zomato,
and the company was acquired by Zomato in a all-stock deal, Zomato has agreed to
acquire instant grocery startup Blinkit for ₹4,447 crore ($569 million) in an all-
stock deal, as it seeks to exploit a fast-growing market for quick grocery delivery.

So its highest valuation of almost $1billion towards end of 2021, it was acquired
by Zomato by haircut to acquiring it for $528M,almost 43% discount to its peak
valuation. So total 33,018 equity shares of Blinkit from its shareholders for a total
purchase consideration of Rs 4,447.48 crore at a price of Rs 13.45 lakh per equity
share. According to VCCircle, the deal will give Japan's SoftBank, the largest
shareholder in Blinkit with a 46% stake, a 3.2% stake in Zomato. Tiger Global
Management will receive approximately 1.3 percent of the shares, while Sequoia
Capital, which is already a Zomato investor, will receive an extra 0.5 percent.
Bennet Coleman and Co. Ltd., Yuri Milner's Apollete Asia, and Korea's KTB
Ventures are additional Blinkit (formerly Grofers) investors who may receive new
shares in Zomato. The promoter entity of Grofers founders, will get 759 million
shares or over 0.8% stake in Zomato.
In simple words, according to the deal terms, Blinkit’s largest shareholder
SoftBank will receive 28.71 crore shares of Zomato, Tiger Global will take home
12.34 crore shares, and BCCL will get 1.5 crore shares and South Korean investor
DAOL will get 3.66 crore shares of the food delivery major.Sequoia’s

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shareholding in Zomato will rise from 1.33 crore shares to 5.84 crore shares as it
will receive 4.51 crore new shares in the company.

This is almost win-win situation for both the companies investors, as Blinkit can
continue in umbrella of Zomato and Zomato can win the race in the quick-
commerce sector.

Financials and Key Metrics;

Zomato's food delivery business increased its gross order value (GOV) at a
compound annual growth rate (CAGR) of about 41% between FY2019 and
FY2022, while the number of orders increased by 2.8 times during that time.
Additionally, during the same time, the average order value (AOV) increased from
Rs. 282 to Rs. 398. Another noteworthy development is the rise in Adjusted
EBITDA, which went from -37% to -1.8%.
The sale of goods proved to be Blinkit's biggest source of income, accounting for
88.83% of its total revenue. In FY22, this revenue decreased 5.7% to Rs 2,324
crore. It's important to remember that Blinkit had an inventory-led business model
in FY22. The company's quick commerce business, which began in December
2021, will be more clearly reflected in FY23 financials.
According to Blinkit's key operational and financial metrics, revenue increased by
about 28% from 236 crores in Q2FY23 to 301 crores in Q3FY23. Additionally,
from -17% to -13%, the adjusted EBITDA margin has improved. From Rs.
4,22,000 in Q2FY23 to Rs. 5,24,000 in Q3FY23, the average GOV (gross order
value) per day per dark store increased at a rate of about 24%.

It is now unclear how Blinkit will achieve EBITDA positivity. The solution
for Blinkit is to raise the average order value (AOV) and GOV per store. Any
further increase in AOV & GOV per store significantly boosts the EBITDA margin
because a large percentage of the dark store's operating expenses are fixed. Blinkit
is, to put it another way, a company with "high operating leverage."
Based on Blinkit's growth rates and improvements over the last two quarters, we
can estimate FY28 adjusted EBITDA of Rs. 416.9 crores by estimating GOV
growth and adjusted EBITDA margin as indicated. Additionally, based on the
estimated FY28 numbers, an enterprise value of Rs. 3,335 crores is obtained if
we apply a reasonable EV/Adj. EBITDA multiple of 8.

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SYNERGIES AND PRODUCTIVITY ;

As both the companies are barely seen any profits in their history, but this win-win
situation can create a leverage in increasing their margins and turn both companies
into a profitable one in upcoming years after takeover.

- Cost Synergy.

As Blink-it Dark stores are a cash-churning machines, Zomato tried to turn it

around. Typically it requires 1000ordes a month to break-even for a Dark Store.
But due to Zomato’s expertise in bringing out the maximum, where it usually takes
6 months for them to the reach milestone but after acquisition it brought down to 2
months. Leveraging Zomato's technological prowess, it effectively estimated the
peak demand for food and groceries, enabling the cross-utilization of resources.

- Delivery Fleet Utilization.

Zomato’s expertise in delivery also played a crucial role, shrinking expenses that
represent a major portion of costs in the dark-store model. Delivery charge
constitutes of substantial percentage, roughly 50%, of expenses, and is one of the
primary factors.
determining the profitability in foodtech businesses. Before the Acquisition,
Blinkit used to pay its delivery partners for shorter distances (up to 5km) 20–30%
more than what Zomato would pay its riders for 5–10 km. So, with integrated
delivery options , a great reduction in cost of delivery will be on cards for Blink-it

Zomato's business will become more tenable as its addressable market and profit
pool grow. Additionally, Zomato will be able to use the delivery fleet and cut
delivery costs by delivering groceries during off-peak hours and food during peak
hours.

- Upscale AOV ( AVERAGE ORDER VALUE )

In January 2022, the first month of operations as Blinkit, contribution margins as a

percentage of gross order value stood at –55%. By the end of that year, this figure
narrowed to –4.5% on average.

With an impressive AOV of ₹635, BlinkIt stands out from competitors like
BigBasket and Zepto, whose AOVs range from ₹400 to ₹500. Each delivery

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becomes more profitable because of the higher contribution margin that results
from this higher AOV. Blink. After switching to quick-commerce in January 2022,
its gross-order value (GOV) increased by 36% in May 2022 and has continued to
rise. Zomato data shows a 162% increase in revenue. These figures point to a
successful merger, and Zomato is sufficiently optimistic that the lucrative path will
be quickening.

One of the main e-commerce models in India is quick commerce, which is

predicted to reach $5 billion by 2025. Online retailers are displacing traditional
brick-and-mortar stores. This supports Zomato's entry into the fast-paced business
world, and it is certain that a delivery service such as BlinkIt would grow
significantly.

- Vast range of SKU’s ( STOCK KEEPING UNIT )

Including electronics like iPhones and PS5s, which are usually bought from
websites like Amazon, helps BlinkIt increase its average revenue per day.In
addition to increasing the AOV, this tactic solidifies BlinkIt's standing as a one-
stop shop. This method, which successfully uses customer behavior to increase
sales, is a crucial component of the BlinkIt marketing strategy.

Under Zomato, Blinkit doubled down on that strategy. At present, nearly 65% of
SKUs in a typical dark store are personal-care products and packaged foods”
according to a report by Elara Capital.

- Customer Acquisition Costs :

The integration of BlinkIt with Zomato, the biggest food delivery app in India, has
greatly facilitated its growth. Zomato offers BlinkIt a huge potential customer base
with more than 100 million active users. Significant growth could result from even
a small percentage of Zomato users switching to BlinkIt.
In May 2022, BlinkIt's monthly order frequency was roughly 3.5 times higher than
Zomato's meal delivery service. Customers prefer delivery within 15 minutes and
have a tendency to shop on the spur of the moment, according to customer metrics.
Quick commerce will therefore increase Zomato's addressable market.

It's interesting to note that Zomato has decided to keep the two apps apart because
it thinks super brands outperform super apps in India. This choice demonstrates the
strategic synergy in the BlinkIt marketing strategy by enabling the company to
preserve its brand identity while taking advantage of Zomato's large user base.
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POST ACQUISTION ;
Financial Concerns :

With this acquisition, Zomato is making its third foray into the grocery delivery
business. Additionally, by competing in a market with well-funded companies like
Amazon, Flipkart, Reliance, and Tata, it might wind up making a significant hole
in its balance sheet.
In this market, it takes a long time to turn a profit, and the company's biggest worry
is that it isn't. Additionally, it further postpones its profitability period following
the acquisition of Blinkit.
According to Dolat, Zomato intends to operate both apps under different brands,
and the absence of private labels makes expenses more obvious than the trajectory
of the margin. With an EV/Rev of 8.1x on May 2022 figures comparable to its own
valuation, the added transaction suggests a 7.4% dilution in the company's current
share capital.

The transaction would have a five-fold impact on the earnings of Zomato:

1)Increased operating losses to fund Blinkit operations, currently at about over

Rs 13 billion at EBIDTA levels.

2) Impact on Other Income, as investments in Capex (~0.75% of GOV) for Blinkit

operations would increase.

3) Concerns have been raised regarding Zomato's equity dilution, despite the
company being listed on the stock exchange. Due to the stock swap, Zomato's
equity has been diluted by 8% of its total capital, which is a significant amount of
both equity capital and earnings dilution. Future economics per share are probably
going to be impacted by that. Over 7.4% dilution in equity, as a result, estimates
have witnessed increased losses for the combined entity by 95/133 per cent for
FY23/FY24E.

4)Zomato stated in a regulatory filing that the board of the company has authorised
the purchase of up to 33,018 equity shares of Blink Commerce Pvt Ltd from its
shareholders for a total purchase consideration of Rs 4,447.48 crore at a price of Rs
13.45 lakh per equity share. For a startup like Quick Commerce that hasn't yet

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established itself as a sustainable business model, Zomato's acquisition of Blinkit

for Rs4,447 crores does seem like a hefty price to pay. Although many quick
commerce businesses are receiving high valuations, it is still difficult to find
evidence of their profitability. In addition to issuing 62.9 crore new shares to
purchase Blinkit through a stock exchange, Zomato will also assume the debt of
Rs1,125 crore that it had previously given to Blinkit this year. The actual amount
Zomato paid is closer to Rs7,447 crore when you include the debt assumption and
the investments made to offset Blinkit's losses. Before Zomato can start making
money, it will need to pay Rs12,219 crore to cover Blinkit's losses, according to
current estimates, which could still be inaccurate. Even then, profitability is more
of a wish. All of this must be done while Zomato is still far from turning a profit,
which means it will be using up all of its capital to cover losses.

5) Since the acquisition announcement, Zomato's shares have fallen more than
20%, from Rs 71 per share to Rs 56 per share. On Tuesday, the stock is up 1% to
Rs 56.85 per share on the BSE, while the BSE Sensex is down 0.5 per share at
around.

Following the integration of Blinkit, food aggregator Zomato's path to profitability

would be further delayed by another year to FY28E, and the share price could drop
by more than 30% to a record low of Rs 48 per share.

6) Zomato spent Rs693 crore during the fiscal year FY22, less than the Rs1,018
crore it spent during the previous year. For the fiscal year FY21, Blinkit reported
losses of Rs6,127 crore. The idea of quick commerce, which has not yet proven
itself in the real world of profit, seems to be the subject of excessive hype.
Additionally, Zomato's acquisition of another business that is spending money
twice as quickly raises serious concerns for shareholders. Two negatives never add
up to a positive, after all.

FUTURE of BLINKIT with ZOMATO:

According to Albinder Dhindsa, CEO of Zomato-owned quick commerce company

Blinkit, “the company intends to continue its growth at the expense of reduced
short-term margins. . In January 2022, Blinkit had over 450 dark stores; now, it has
over 400.

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Zomato have infused Rs 2,300 crore in Blinkit since it acquired the company in
August 2022,
By the end of 2026, it hopes to have 2,000 dark stores, up from the current 639
The last few quarters have seen the company rapidly grow its network of dark
stores. Blinkit increased its number of stores from 526 to 113 in the first quarter
(Q1) of the 2024.We currently see a line of sight to reach roughly 2,000 stores for
our business. In India's top ten cities, most of these stores would be located. The
market's size outside of major cities is still unknown. How well we perform will
determine how quickly we reach this store count.”

CHALLENGES :

Increasing the number of dark stores and placing warehouses in strategic locations
to maximize delivery times are two of the aggressive expansion plans. To meet the
increasing demand from customers for quicker deliveries—often within minutes—
Blinkit must improve its network. Blinkit's expansion will take advantage of the
current technological and logistical infrastructure as part of Zomato's larger plan,
allowing for a smooth partnership with Zomato's food delivery services.

The quick commerce industry has seen a surge in competition as several businesses
compete for supremacy. The stakes are very high, as evidenced by Blinkit's strong
expansion strategy when it entered this race. Customers now appreciate the ease of
quick delivery of groceries and necessities, which makes this industry a profitable
battlefield. Because competitors will be reacting to preserve their market positions,
Blinkit's aggressive push is likely to encourage additional innovations and service
enhancements throughout the industry.

CONCLUSION ;
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 CASE STUDY OF ZOMATO’S ACQUISITION OF BLINKIT

An overview of the rapid commerce market in India. It all comes down to speed.
The transition from tiny mom-and-pop shops to massive supermarkets and
hypermarkets has been a long one. Things changed when e-commerce emerged.
The next evolution—or perhaps disruption—came next. The term "new age of e-
commerce" was once used to describe quick commerce.
Zepto, Swiggy, Instamart, Dunzo, and Blinkit are the players in India. A vast
network of "dark stores" is being established by all of them. These businesses use
these retail spaces to keep their inventory. They don't have retail locations. These
dark shops are near accessible shopping malls and are rather compact. They can
promise deliveries between 10 and 30 minutes because of this.
Blinkit is a good acquisition for Zomato in addition to the chance to capture a
portion of the market. Higher average order value (AOV) than food delivery,
higher ad sales revenue from larger marketing budgets, and lower last-mile
delivery costs than food delivery because of shorter delivery times and more orders
per day are the three reasons Blinkit is a high-margin company.
Blinkit's technical mastery of hyperlocal delivery demonstrates how cutting-edge
technology can transform conventional business models. Blinkit is breaking new
speed and efficiency records by utilizing a combination of real-time data
processing, microservices architecture, and sophisticated geospatial algorithms. As
the business develops further, its creative strategy will surely impact e-commerce
and delivery services in the future, opening the door for even more breakthroughs
in the sector.

According to Goldman Sachs analysts, Blinkit's implied valuation has soared to an

impressive $13 billion since the acquisition, which was made in 2022 for $568
million, on the strength of impressive performance improvements. On a year-over-
year (YoY) basis, this indicates a startling sixfold increase in valuation.
"We note that Blinkit's implied valuation in our Zomato's sum of the parts [SOTP]
is [close to] $13 billion now, versus $2 billion in March 2023, with per share
implied value of Rs 119 higher than food delivery, at Rs 98, for the first time," the
document stated. Blinkit is the largest segment of Zomato, which currently has a
market capitalization of about $20 billion, with a significant $13 billion total
market capitalization.
So Blinkit is turning to be the greatest bet for the Zomato’s history which going to
cross in Zomato itself. In my opinion, the quick commerce market can continue to
overtake slotted delivery and, with a good balance between price and delivery
times, reach about 70% of India's online grocery market in two to three years.

References ;

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Bhoite, P. (2023) Zomato: Is there enough juice left at current valuation?, Thryvv. Available at:
https://thryvv.in/article/zomato-is-there-enough-juice-left-at-current-valuation/ ]

Rudra, T. (2022) Zomato completes acquisition of Quick-Commerce Startup Blinkit, Inc42

Media. Available at: https://inc42.com/buzz/zomato-completes-acquisition-of-quick-
commerce-startup-blinkit/

Zomato finally bags Blinkit. but does its claim of biz synergy hold? (no date) The CapTable -
YourStorys premium news platform. Available at:
https://the-captable.com/2022/06/zomato-blinkit-unit-economics-instamart-deal-quick-
commerce/

Migrator (2023) Nearly $1 billion loss in Zomato’s value in two days after Blinkit deal, NDTV
Profit. Available at: https://www.ndtvprofit.com/business/nearly-1-billion-loss-in-zomatos-
value-in-two-days-after-blinkit-deal-3107251

Blinkit to challenge rivals with Massive Growth Plans (no date) Xartup. Available at:
https://www.xartup.com/newsblog/blinkit-to-challenge-rivals-with-massive-growth-plans

AppsRhino, A. (no date) How blinkit works? Business Model & Revenue models, Custom mobile
app development company. Available at: https://www.appsrhino.com/blogs/how-blinkit-
works-business-model-revenue-model

Barik, S. (2022) Explained: Why is Blinkit shutting down some dark stores?, The Indian Express.
Available at: https://indianexpress.com/article/explained/explained-why-blinkit-shutting-
down-some-dark-stores-7819171/1000/

Garg, R. (2022) All about the Zomato and Blinkit deal, iPleaders. Available at:
https://blog.ipleaders.in/all-about-the-zomato-and-blinkit-deal/

Kunal Manchanda & Md Salman Ashrafi (2023) Blinkit’s losses cross rs 1,400 Cr in FY22,
GMV remains flat, Entrackr. Available at: https://entrackr.com/2023/03/blinkits-losses-
cross-rs-1400-cr-in-fy22-gmv-remains-flat/

Zomato finally bags Blinkit. but does its claim of biz synergy hold? (no date a) The CapTable -
YourStorys premium news platform. Available at:
https://the-captable.com/2022/06/zomato-blinkit-unit-economics-instamart-deal-quick-
commerce/

Blinkit will be bigger than Zomato’s food delivery business in a year, says Deepinder Goyal
(2024) Business Today. Available at:
https://www.businesstoday.in/technology/news/story/blinkit-will-be-bigger-than-zomatos-
food-delivery-business-in-a-year-says-deepinder-goyal-421907-2024-03-18

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