Case Study on Acquisition of Blinkit by
Zomato-Valuation and Future Prospect
In June 2022, the Indian food delivery giant Zomato made a power move by acquiring
Blinkit, the country's leading quick commerce platform, for a whopping $568 million (INR
4,447 crore) in an all-stock deal.
But lets first understand what does Acquisition means ?
An acquisition occurs when a company (the acquirer) purchases most or all of the assets of
another company (the target) in order to gain control of it. This is a common practice in the
business world and can be a good way for a company to grow and achieve its goals.
Types of Acquisition:
Share Acquisition: The acquirer acquires the stock of the target company and
thus acquires
Asset Acquisition: The acquirer acquires the assets of the target company such as
vehicles, products, products. or intellectual property (IP).
Integration: Technically this is a different situation, but sometimes it is also said
to be an acquisition. In a merger, two companies combine to form an entirely new
organization.
Acquisition Benefits:
Faster Entry to Market: Companies can quickly enter new markets by acquiring
companies that are already established in that business.
Synergies and Economies of Scale: and Competitor mergers Eliminate
duplication of work you can remove it and save costs.
Increase market share: Acquiring competitors can help the company take on
more business and reduce costs. Be important in their work.
Acquisitions in general can be a powerful tool for good investment, but it requires careful
planning and execution to be successful.
Steps to acquire a company in India:-
1. Examine the Object Clause in the Memorandum.
2. Send Stock Exchange a Notice.
3. Make a Draft of the merger proposal.
4. Submit A Request To The High Courts.
5. Notice Sent to Creditors and Shareholders.
6. Orders are sent to the Registrar of Companies.
7. The Company’s Assets And Liabilities Should Be Merged.
8. Shares and debt obligations are issued for subscription.
How Zomato Gobbled Up Blinkit !
Introduction to the Companies:-
Zomato :- Zomato was founded in 2008 under the name FoodieBay by Deepinder Goyal
and Pankaj Chaddah, who worked at Bain & Company. The website was launched as a
restaurant listing and recommendation portal. They changed the name of the company to
Zomato in 2010 because they were unsure whether to "focus only on food" and also to avoid
conflict with eBay.
Some of Zomato's notable acquisitions are :-
o Uber Eats India (food delivery)
o Runnr (logistics startup)
o TongueStun (catering service platform)
o Menu Mania (restaurant discovery platform)
Blinkit :- Blinkit was innovated as Grofers in December 2013 by Albinder Dhindsa and
Saurabh Kumar. They met while working out at Cambridge Systematics in the late 2000s
and latterly penetrated the food quittance field together. Their thing is to break cases related
to business discordance( both on the consumer and business side). Launched in Delhi NCR
before reaching other metropolises of India Blinkit substantially sells food, fresh fates,
vegetables, flesh, stationery, bakery, particular care, baby care and pet care productions,
snacks, flowers etc.
Number of
Transaction Name Fund Raised
Investors
Series A 1 US$500K
Series B 2 US$10M
Series C 2 US$36.5M
Series D 5 US$120M
Series E 3 US$58.6M
Series F 7 US$264M
Sale Zomato US$568.31M
Strategic Investment: A Recipe for Growth
Zomato's acquisition of Blinkit wasn't just about adding another app to its portfolio. It was a
strategic move aimed at:
Market Expansion: Zomato craved a bigger slice of the pie. Quick commerce, with
its promise of lightning-fast grocery delivery, was a lucrative market they couldn't
ignore. Blinkit's established network and expertise offered the perfect entry point.
Engaging Customers for Life: Imagine ordering dinner and groceries at the same
time! By integrating Blinkit, Zomato could become a one-stop shop for all things food
and essentials, potentially leading to more frequent orders and higher customer
loyalty.
Data & Logistics Symphony: Data is the new oil, and Zomato saw an opportunity to
leverage Blinkit's customer data and delivery network to optimize its own operations.
This could translate to faster deliveries and potentially lower costs for Zomato.
Valuation: A Balancing Act
The $568 million price tag raised eyebrows. Here's why:
Blinkit's Promising Future: The quick commerce market was in its infancy but
brimming with potential. Investors, including Zomato, saw Blinkit as a frontrunner
with the ability to capture a significant market share.
Strategic Premium: Zomato likely paid a premium for Blinkit due to the strategic fit
and the potential for future synergies between the two companies.
Profitability Concerns: However, some investors expressed concerns about the high
valuation for a company yet to turn a profit. Zomato's stock price even dipped after
the announcement, reflecting this skepticism.
The board of Zomato has authorised 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,
according to Zomato’s letter to the BSE. Shareholders of Blinkit will receive one Zomato
share for every ten Blinkit shares.
Future Prospects: A Race Against Time
The success of this acquisition hinges on several factors:
Execution is the Key: Zomato needs to seamlessly integrate Blinkit, optimize
operations across both platforms, and find a path to profitability in the quick
commerce segment.
Standing Out in the Crowd: The Indian quick commerce market is a battlefield.
Zomato will need to differentiate itself through features like even faster delivery
times, a wider product variety, and potentially, bundled offerings with its core food
delivery service.
The Path to Profitability: Turning a profit in quick commerce remains a challenge.
Zomato will need to carefully manage costs, explore revenue streams beyond delivery
fees, and potentially leverage its existing customer base for cross-promotion.
The Final Bite: A Bold Move with Big Potential
The Zomato-Blinkit acquisition is a bold move with the potential to reshape the Indian food
and grocery delivery landscape. While challenges remain, a successful integration and a clear
path to profitability can unlock significant growth opportunities for Zomato. Only time will
tell if this strategic gamble will pay off, but one thing is certain: the Indian consumer is set to
benefit from a more convenient and potentially faster way to get their groceries and favorite
meals.
