Delhi/Bengaluru Zomato Ltd is set to take control of Blinkit after the food aggregator extended a $150 million emergency loan facility to an accelerated commerce startup, two people familiar with the deal said.
The transaction includes an all-stock deal that values Blinkit between $700 million and $800 million, the people said on condition of anonymity. The deal value is significantly lower than Blinkit, the unicorn status it acquired after receiving over $120 million from Zomato and investor Tiger Global Management, Mint reported in August. Zomato owns about 10% of Blinkit.
Lowered valuations indicate that Blinkit (run by Grofers India Pvt Ltd) is struggling to keep up with 10-minute delivery of groceries. The loss of the unicorn tag in less than a year could also dampen investor enthusiasm around cash-guzzling quick-commerce startups.
In a regulatory filing late on Tuesday, Zomato said it would loan Blinkit $150 million in one or more tranches. “This loan will support the capital requirements of Grofers India Pvt Ltd. Ltd. is in line with our stated intention to invest up to $400 million in cash in accelerated commerce in India in the near term and over the next two years.” Zomato, however, did not disclose whether it planned to acquire Blinkit.
The quick-commerce company, which pioneered 10-minute delivery of groceries with the help of so-called dark stores, was one of more than 40 unicorns created in India last year, or startups valued at over $1 billion.
The people said Zomato’s acquisition of Blinkit is expected to be completed in 60 days. SoftBank, which had a 40% stake in Blinkit, will get a 4-5% stake in Zomato as part of the transaction, while Tiger Global and Sequoia Capital will get additional shares in the entity, they said, without disclosing more details. .
Emails sent to spokespersons for Zomato, Blinkit, SoftBank, Sequoia and Tiger Global did not elicit an immediate response.
Blinkit’s down round indicates startups are finding it difficult to raise funding on favorable terms amid geopolitical tensions in Europe and major central banks rolling out ultra-easy monetary policies and raising interest rates.
The developments came after an enthusiastic 2021 when a record number of Indian startups became unicorns. Many of India’s most popular startups went public, including Zomato, which became the first unicorn to be listed in India.
After achieving unicorn status last year, Grofers co-founder and CEO Albinder Dhindsa said in an interview that the company is poised to make all deliveries within 10 minutes. It switched itself to Blinkit in December to focus on its move to quick commerce. Meanwhile, startups new and old also joined the quick-commerce bandwagon as the 10-minute delivery service became the talk of the town. For example, Zepto, a 10-minute grocery delivery app founded by an 18-year-old dropout from Stanford University, raised $100 million in December in a Series C funding round led by U.S. technology startup accelerator Y Combinator’s Continuity Fund. The funding round comes 45 days after the company announced a $60 million fundraising in November. Earlier this year, Ola rebranded its Instant Commerce business as Ola Dash.
With competition increasing, Blinkit soon started to get into trouble. The Moneycontrol website reported that the company laid off employees, closed dark stores and delayed some vendor payments over the past weeks.
By planning to acquire Blinkit, Zomato has underscored its commitment to the quick-commerce space. In fact, its investment in Blinkit last year also meant that Zomato would bring groceries back on the platform after it was discontinued in 2020.
In its third quarter earnings report, Zomato said that it is fast-growing commerce segment and will invest $400 million in this category over the next two years.
“Blinkit is the closest to how we all know the instant-commerce business today. Following our $100 million investment in August 2021, Blinkit pioneered 10-minute grocery delivery in India.
It said that Blinkit rapidly grew to a $450 million annual run-rate gross merchandise value (GMV) (January 2022 annual) and now operates more than 400 dark stores in 20 cities in India.
Zomato co-founder and CEO Deepinder Goyal sold his stake in Blinkit to Tiger Global Management in February.
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