The board of directors of online food delivery major Zomato on Friday approved the acquisition of Blinkit (formerly Grofers) for a total purchase consideration of Rs 4,447.48 crore in a share-swap deal.
The deal value of Rs 4,447.48 crore (around $570 million) is 43% lower than Blinkit’s last valuation of over $1 billion and also lower than $700-750 million, the valuation when the initial level of talks for the merger had started.
“This acquisition is in line with our strategy of investing in the quick commerce business,” Zomato said in a regulatory filing.
Zomato’s filing about the transaction also revealed Blinkit’s annual turnovers in the last three fiscals: Rs 263 crore in FY22, Rs 200 crore in FY21 and Rs 165 crore in FY20.
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 in 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 in Blinkit in August 2021. At that time, Zomato had said that it has plans to invest a total of $400 million in Blinkit, a 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.
Zomato shares closed 1.37% up at Rs 70.50 on the Bombay Stock Exchange on Friday.