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Quick delivery app Blinkit to merge with Zomato: Share swap deal may value Blinkit at $700-750 million

Blinkit’s merger move comes at a time when it has been struggling to raise funds, forcing it to lay off employees and shut down warehouses.

On Tuesday, Zomato announced an investment of $150 million into Blinkit in form of debt.
On Tuesday, Zomato announced an investment of $150 million into Blinkit in form of debt.

Online food delivery unicorn Zomato is in talks to acquire 10-minute grocery delivery platform Blinkit (formerly Grofers), in a share swap deal, which will likely value the latter at around $700-750 million, a person aware of the deal told FE.

“Zomato has been working on the deal since the start of the year but the company is yet to publicly inform the exchanges on the merger deal,” the person added.

Blinkit’s merger move with Zomato comes at a time when it has been struggling to raise funds, forcing it to lay off employees and shut down its warehouses to conserve cash.

On Tuesday, Zomato announced an investment of $150 million into Blinkit in form of debt to help the struggling grocery delivery start-up to meet its dues to vendors and other creditors. In a filing with the exchanges on Tuesday evening, Zomato said that its $150-million loan to Blinkit will be disbursed in multiple tranches with a 12% annual interest rate.

“The proposed investment is subject to fulfilment of certain customary conditions precedent and other terms and conditions agreed under the investment agreement executed between the parties; and grant of loan up to rupee equivalent of $150 million to Grofers India Private Limited in one or more tranches and delegated the authority to the senior management of the company to decide the key terms of the loan and execute the definitive documents at a future date. The interest rate for the loan will be 12% per annum or higher with a tenor of not more than 1 year. This loan will supplement the capital requirements of GIPL in the near term and is in line with our stated intent of investing up to $400 million cash in quick commerce in India over the next two years,” Zomato said in the filing.

A Zomato spokesperson declined to comment. Multiple calls and texts sent out to Blinkit CEO Albinder Dhindsa were unanswered till the time of going to the press.

Prior to this, Zomato also invested around $100 million into Blinkit in August last year. At that time, Zomato said that it has plans to invest a total of $400 million into Blinkit, part of which would be structured as convertible notes. Zomato acquired a 9.3% stake in Blinkit at that time but also hinted at a potential merger in the works.

According to a Moneycontrol report on Tuesday, Zomato is expected to file for approval to the Competition Commission of India (CCI) shorty. The report added that under the term sheet, Blinkit’s lead investor SoftBank is expected to get a 4% stake in Zomato through the merger.

Zomato’s merger with Blinkit comes at a time when e-grocery services are witnessing heavy demand with 10-minute grocery delivery apps mopping up most of the funding. The pandemic has nudged more people to take to online grocery shopping and analysts believe the trend is here to stay. Industry experts say that India had an estimated 154 million online transacting households as of CY20, with 130 million either already using e-grocery platforms or willing to try.

Tier two cities and beyond will be the next growth frontier for the segment players. Following the onset of the pandemic in March 2020, Zomato had introduced grocery services on the app but discontinued it after the food delivery business got back in shape.

Zomato is actively looking at the e-grocery space which the company believes is a “large opportunity”. Last year, executives at the firm had said that the strategy behind the company’s investment in Grofers was to get more exposure to the space and build a strategy around the e-grocery business.

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