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Zomato board likely to approve Blinkit buy on Friday

This means that the deal with Blinkit will not involve any cash outgo on the part of Zomato but will be a share swap deal. It is likely that the swap will be in the ratio of 1:10 where Zomato would get 10 shares of Blinkit for every one of its shares.

In the past, Zomato had extended a short-term loan of $150 million for Blinkit’s short-term capital requirements.
In the initial level of talks between the two firms, the valuation of Blinkit was seen at $700-750 million but this is likely to come down now.

The board of directors of Zomato will meet on June 24 to likely approve the acquisition of e-grocery startup Blinkit (formerly Grofers). While Zomato, in a regulatory filing on Wednesday, did not say whether the upcoming board meet was related to the Blinkit deal, it just said that it is to discuss a potential acquisition.

“Pursuant to Regulation 29 of listing regulations, as amended, this is to inform you that a meeting of the board of directors of Zomato is scheduled to be held on Friday, June 24, 2022, to discuss a potential acquisition transaction by the company, the consideration for which may be discharged through an issuance of equity shares of the company by way of a preferential issue,” the stock exchange filing said.

This means that the deal with Blinkit will not involve any cash outgo on the part of Zomato but will be a share swap deal. It is likely that the swap will be in the ratio of 1:10 where Zomato would get 10 shares of Blinkit for every one of its shares.

In the initial level of talks between the two firms, the valuation of Blinkit was seen at $700-750 million but this is likely to come down now.

Blinkit has been struggling to raise funds, which has led it to lay off employees and shut down its warehouses to conserve cash.

In March, Zomato had announced an investment of $150 million into Blinkit in form of debt to help it to meet its dues to vendors and other creditors. Zomato had then said that the loan to Blinkit will be disbursed in multiple tranches with a 12% annual interest rate.

Prior to that, Zomato had invested around $100 million into Blinkit in August 2021. At that time, Zomato had said that it has plans to invest a total of $400 million into Blinkit, part of which would be structured as convertible notes. Zomato had at that time hinted at a potential merger in the days to come.

With the pandemic leading more and more people to take to online grocery shopping, analysts feel the trend is here to stay and tier-two cities and beyond will be the next growth frontier for the segment players. Zomato has been actively looking at the e-grocery space as it feels that there’s a large opportunity here. Last year, executives at the firm had said that the strategy behind the company’s investment in Blinkit was to get more exposure to the space and build a strategy around the e-grocery business.

On Wednesday, Zomato shares closed up 2.12% at Rs 67.55 on the BSE.

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