Tag: Grofers

From downbeat Grofers to thriving Blinkit: Inside Zomato’s brahmastra

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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When Zomato announced Blinkit’s acquisition in June 2022, it was seen as a rescue act to save the sinking startup.

For one, Blinkit and Zomato co-founders Albinder Dhindsa and Deepinder Goyal, respectively, were known to be close friends from their younger days. Some even questioned whether Zomato should have explicitly disclosed to investors that Dhindsa’s wife was a top executive at the food delivery company.

Meanwhile, both the companies found themselves in different spots of bother.

Zomato’s multiple efforts at grocery delivery had failed, while its archrival Swiggy was doing well in quick commerce. Its stock was taking a beating as pre-IPO investors were selling shares like there was no tomorrow. The core food delivery business was showing early signs of sputtering growth. And, the public market was demanding a quick path to profitability.

At the same time, Blinkit (previously Grofers) was cash-strapped and feeling the heat in the intensely competitive quick commerce space. It had laid off employees, shuttered dark stores, and even delayed vendor payments. The acquisition came months after Zomato extended a $150 million loan to keep Blinkit on life support. While the share swap deal’s value was earlier estimated to be upwards of $700 million, the drop in Zomato’s stock price had reduced it to $568 million.

For Zomato, Blinkit was a last-ditch effort to enter into the grocery space after it retreated twice from the segment – in 2020 and 2021.

Things change 

Nearly two years later, Goyal and Dhindsa appear to have proved their sceptics wrong.

Take for instance, Jefferies, after meeting with Zomato’s Deepinder Goyal and CFO Akshant Goyal around September 2022, asked if quick commerce was for real considering that “…scepticism is high on quick commerce, given no proof of concept yet in any large market in the world.”

The note to clients added that a lot of investors expressed a fundamental question on Blinkit’s existence, with people asking ‘why someone wants grocery delivery in 10-min?’

Cut to February 2024, the same brokerage house said Q3FY24 “…was another strong quarter with exceptional performance in quick commerce (Q/C)…” which in a way underscored Blinkit’s turnaround.

From being an albatross around Zomato’s neck, Blinkit has transformed into a thriving player in the express delivery space, taking on rivals such as Swiggy’s Instamart, Tata group’s BB Now, Zepto, Amazon and Flipkart among others. From delivering groceries and vegetables, Blinkit has expanded to deliver just about anything – iPhones, condoms, personal massagers, sundry items for local festivals, and even running printing services.

Management gurus who value focus in a business might baulk at Blinkit’s approach, but the numbers tell a different story.

Blinkit incurred a net loss of Rs 1,440 crore in FY22 but its adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) loss reduced to Rs 89 crore as of Q3FY24 and is months away from profitability.

The company said it is on track to meet its guidance of adjusted EBITDA break-even on or before Q1FY25.

What gives? 

Blinkit’s execution, working capital discipline, and cataloguing give the Gurugram-based company an edge over its peers.

For instance, Blinkit is the only quick-commerce company that generates a purchase order (PO) daily whereas Swiggy Instamart and Zepto do it every week, as per Sreejith Moolayil, founder of True Elements, a functional foods brand, that sells across the quick grocery platforms.

“Blinkit does daily POs because of which their working capital requirement is the lowest. They don’t keep too much inventory. They’re probably losing some opportunities which I don’t think they mind, seeing their bottom line and growth,” Moolayil explained.

While shipping supplies to warehouses across the country on a daily basis can be a pain for brands, it helps Blinkit be nimble in stocking up inventory in lockstep with demand patterns and have better control over its finances which is crucial as quick commerce companies work on take rates from each consumer order.

Take rate is the commission paid to an e-commerce player for facilitating a transaction on its platform.

Quick commerce platforms earn take rates between 15 and 35 percent depending on the pull of a consumer brand and the category it operates in. The take rate could include a listing fee, advertising revenue and shipping charges that brands pay. Companies in the sector also earn from advertisements, which in Blinkit’s case is growing faster than order value as of Q3FY24.

That’s an arrangement different from what other e-commerce companies follow. Amazon and Flipkart for instance run a marketplace model where sellers list their products on the platform and ship to buyers.

While some items are stocked in company warehouses, most sellers merely list products on these apps/websites and dispatch them once an order is placed. In contrast, quick commerce companies stock up the products that are listed on the apps in neighbourhood ‘dark stores’ which helps in more localised forecasting, cataloguing and minutes-long delivery timelines.

Quick commerce companies, especially Blinkit, are however expanding stock keeping units (SKUs) to graduate from selling daily essentials to selling reading glasses, electronics,  and several other products which helps them compete with established e-commerce players.

For quick commerce companies, having a wider assortment essentially means the firm has more products to offer consumers, which bulks up the cart’s value in each purchase.

Experts say that more SKUs also translate to a higher ordering frequency for an app, which is vital for them to grow their user base. Thereon, an expanding user pool builds a habit and trust which leads to a better brand recall.

Along with efforts to widen its assortment, Blinkit has also cracked the code on establishing a rapport with its top sellers which is giving the company an edge over others, say industry executives.

“What we know for sure is that Blinkit always took a wider assortment approach when compared to Swiggy Instamart or Zepto and now everyone is following this approach as it seems to have worked in Blinkit’s favour,” said Sachin Dixit, lead analyst, internet, at JM Financial.

However, Dixit is quick to add a disclaimer, saying: “See, it’s also a cause and effect thing— because Blinkit is doing well now, in retrospect people are saying this worked for the company and this did not. In reality, we do not know for certain what clicked.”

Deploying the charm offensive

A founder, who is a top seller on Amazon and Blinkit, said there is a remarkable difference in the way the two companies treat their sellers. He said that the engagement with the Amazon account management team is purely formal where the two parties mostly meet when something needs to be addressed and the meeting ends after.

“But Blinkit has broken that in its typical flamboyant Delhi style of doing things. Blinkit has already called its sellers twice for a dinner party with Mr Dhindsa (referring to Blinkit CEO Albinder Dhindsa) in the past year. At the party in Delhi, Mr Dhindsa asked his sellers what the problems were and how Blinkit could solve them. Overall, they’re more accessible to us sellers,” the founder said, requesting anonymity as he does not want to burn bridges with other companies.

While Blinkit has been doing this since at least January or February 2023, competitors like Swiggy Instamart hosted a similar gathering only around November or December last year. The founder said he can’t recall a similar arrangement from Zepto’s side, at least for him.

Another differentiator that has helped Blinkit is the company’s practice of providing sellers with early intelligence on what things will sell better on certain festive days.

“Last month, during Sankranti/Lohri, Blinkit had informed us much earlier that sesame-based products would go through the roof so we were able to manage inventory and demand very well. Not that others aren’t planning engagement well, but as of now, in our category, Blinkit has an edge and probably the first-mover advantage,” a founder of a snacks company said while underlining Blinkit’s control over hyperlocal events.

The founder added that the company will do the same for Holi, slated for the second half of March.

The Z factor

Zomato’s acquisition of Blinkit is also a key reason why the company has been able to steady the ship.

“After Zomato bought a 10 percent stake in Blinkit in March 2022, Deepinder Goyal spent six months diving deep into the inner workings of the company to understand if it could be turned around. Only when he was convinced did Zomato move to acquire the company,” said an industry executive in the know.

“What makes Deepinder different from other founders is that he is a lot quicker in making decisions. He is very focussed,” the executive said. CEO Goyal is also known to be aggressive when it comes to controlling costs, as witnessed by the surprise turnaround in Zomato, which has been profitable for three consecutive quarters.

If not for Zomato, Blinkit’s fortunes could have turned out to be very different.

“In quick commerce, it’s all about razor sharp delivery execution capability and inventory management, which I am sure the Zomato leadership has instilled into Blinkit,” said Sreedhar Prasad, Internet business expert and former partner with KPMG & Kalaari Capital while adding that with Hyperpure, Zomato’s wholesale arm, also being a strong node in the ecosystem, the inventory layer gets a strong back end platform.

“Further, the ‘data’ focus of Zomato would be helping the Blinkit team in being sharp in being predictive on inventory management which will result in lesser stockouts,” Prasad said.

Zomato’s shares traded at Rs 66 apiece around the beginning of June 2022, and later dropped to a low of Rs 42 a month later when Blinkit’s acquisition deal was met with scepticism. The company’s shares have however rallied over 280 percent, comfortably outperforming the Nifty, from its low to change hands at around Rs 160 apiece now.

Also, the Blinkit app being housed separately from that of the parent brand also helps the company as it draws a more loyal quick-commerce shopper base, according to Rahul Jain, vice president, Dolat Capital, which tracks internet companies.

Jain added that Zomato, and Blinkit, being in better financial health than Swiggy allows the Gurugram-based company to take risks and be more competitive.

For comparison, Swiggy had a revenue of Rs 8,625 crore and incurred a loss of Rs 4,179 crore in FY23. Arch rival Zomato on the other hand registered a revenue of Rs 7,761 crore and recorded a net loss of Rs 971 crore in the same year. Zomato has been profitable so far in FY24.

However, another industry executive also pointed out that Zomato and Blinkit are yet to find operational synergies on the ground.

For instance, they have kept their delivery fleets separate as food and quick commerce deliveries are different in terms of distance covered. In food delivery, a rider may need to cover a distance of 5-8 kilometres in 15-20 minutes. In quick commerce, the expectation is to cover 2 kilometres in 5 minutes.

Moreover, given the smaller radius of a quick commerce rider, they tend to develop more familiarity with particular neighbourhoods or housing societies which increases their efficiency in reaching the customer’s doorstep quicker and without calling up the consumer for directions.

Future tense

Where does Blinkit go from here?

Zomato thinks the quick commerce app can become bigger than the food delivery app in the future. Deepinder Goyal said last year that Blinkit will deliver more value to shareholders than the core business of food delivery in the next 10 years.

“I can proudly say that Blinkit’s GOV (gross order value) is very close to Zomato’s GOV in some of the large cities where we have an overlapping presence. This is just the start, and I believe that 10 years from now, Blinkit will drive more value for our shareholders than Zomato,” Goyal wrote in a letter to shareholders in August 2023.

This was right after Blinkit recorded its highest-ever GOV and transacting customers in the months of June and July, after recovering from the business disruption caused by a delivery workers’ strike in its biggest market, Delhi-NCR.

However, one thing that might constrain Blinkit’s rise is the country’s macroeconomic fundamentals.

Sure, Blinkit and its quick commerce peers have demonstrated growth in the top eight cities. But, can they go beyond?

If we go by the trajectory of food delivery, around 50 percent of Zomato’s sales still come from around 5 percent of its users, who expected. The case will not be very different for Swiggy. And this after the two have poured billions of dollars to grow the market.

To be sure, experts are of the opinion that the days of heady growth for food delivery are over as it has almost fully penetrated the top layer of India’s tech-savvy and prosperous urban population. Swiggy boss Sriharsha Majety and Zomato CEO have both concurred with that view.

Quick commerce is not a very different value proposition in the consumer’s mind, compared to food delivery. Will the Indian consumer in Tier 2 and 3 cities pay up a bit extra for quick doorstep deliveries of fruits, vegetables, cereals, packaged snacks and the like? Or, will they be prosperous enough to do so?

As Blinkit grows bigger, it will need to find answers to such questions. For now, it can take heart from a job well done in staging a turnaround that many believed was not possible.

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Zomato keeps preferential price unchanged in pursuit of Blinkit despite lower valuation from EY

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Zomato has kept its preferential price unchanged at Rs 70.76 per share for its Blinkit acquisition despite EY valuing it lower in the second round of evaluation.

On June 24, Zomato’s board gave its go-ahead for the Deepinder Goyal-led company to acquire the e-grocery startup Blinkit (formerly Grofers), which was founded by his long-time friend and former ‘Zoman’ Albinder Dhindsa.

In its first valuation report, EY had priced Zomato at Rs 70.76 per share, but the company obtained a second valuation after a specific request from exchanges.

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EY’s second valuation report used different valuation methodologies and determined that the fair value was lower.

The food delivery company’s stock has shot up over 23 percent in the past five trading sessions but is still down over 50 percent from its listing price.

Also Read | Timeline: Zomato’s year-long pursuit of Blinkit

In an all-stock deal, Zomato wants to swap shares with Blinkit, valuing the grocery delivery platform at $568 million. Zomato has cut Blinkit’s valuation nearly in half since turning the e-grocer into a unicorn in a $120 million funding round co-led with Tiger Global last August.

Zomato on Thursday said investment firm Tiger Global had reduced its stake in the company by almost half to 2.77 percent by selling over 18.45 crore shares in the open market. Tiger Global’s Internet Fund VI Pte Ltd had a holding of 5.11 percent in the online food delivery platform before the sale.

A day earlier, Ride-hailing app Uber offloaded 61.2 crore shares for Rs 3,088 crore through an open market transaction. According to bulk deal data available with BSE, Uber BV sold 61,21,99,100 shares, amounting to a 7.8 percent stake in the company.

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Timeline: Zomato’s year-long pursuit of Blinkit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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On June 24, Zomato’s board gave its go-ahead for the Deepinder Goyal-led company to acquire the e-grocery startup Blinkit (formerly Grofers), which was founded by his long-time friend and former ‘Zoman’ Albinder Dhindsa.

Friends from their student days at IIT-Delhi, Dhindsa also led Zomato’s global operations for a few years before venturing out to start Grofers in 2013. The coming-together of the two hyperlocal delivery startups was anticipated for the better part of the year gone by.

In an all-stock deal, Zomato is swapping shares with Blinkit, valuing the grocery delivery platform at USD 568 million. Zomato has cut Blinkit’s valuation nearly in half since turning the e-grocer into a unicorn in a USD 120 million funding round co-led with Tiger Global last August.

“Even globally, we are seeing that food delivery and quick commerce are converging,” said Zomato’s CFO Akshant Goyal (a not-so-subtle reference to domestic rival Swiggy and its Instamart…).

The founder and CEO Deepinder Goyal sees Blinkit as a natural extension of his food delivery startup. Why? “It is also a hyper-local business, just like food delivery.”

It is the case of one loss-making company acquiring another loss-making company. Leaving aside its own financials, Zomato’s management is drawing confidence from the narrowing of Blinkit’s adjusted EBITDA from Rs 204 crore in January to Rs 107 crore in May. The reason: better unit economics through cost-cutting measures such as shuttering 50 ‘unviable dark stores’ over the same time period.

It’s been tough for Blinkit, facing the aggressive Zepto, Swiggy’s Instamart, Tata-backed Big Basket and Reliance-funded Dunzo. In February, a big cash crunch even led Zomato to extend a USD 150 million loan to Blinkit, which sparked more news about the possible merger.

For this year and the next, Zomato is ready to fund the losses. But, there is ‘an expectation, not guidance’, that Blinkit can achieve adjusted EBITDA break-even in less than three years.

Besides the opportunity for quick commerce startups to corner a large part of the USD 1 trillion commerce market in India, Deepinder Goyal gives three reasons why Blinkit is a high-margin business:

Higher average order value (AOV) than food delivery, higher ad sales revenue due to larger marketing budgets of consumer packaged products (CPG) brands, and lower last-mile delivery cost than food delivery with shorter delivery time and higher number of orders per day.

Goyal also reiterated that quick commerce has been Zomato’s stated priority since the last one year. Here’s a timeline of Zomato’s year-long pursuit of Blinkit (formerly Grofers):

June, 2021: Zomato turns Grofers into a unicorn

Throughout the month, as reports emerged about Zomato’s potential investment in Grofers, the e-grocery platform refused to confirm or deny the news, calling it ‘speculation’.

In the backdrop, competition in the grocery delivery space was intensifying with Grofer’s largest competitor Big Basket getting acquired by the Tata Group. Zomato’s rival Swiggy was aggressively building its hyper-local play with its own e-grocery service — Swiggy Instamart — after raising $1.25 billion in funding.

As expected, at the end of the month, Zomato led the USD 120 million funding round in Grofers at a valuation of USD 1 billion in exchange for nearly 10 percent stake. To be noted, Tiger Global — a common investor in both Zomato and Grofers — too participated in the round. However, most of the funds came from Zomato, which confirmed later that it had committed USD 100 million to Grofers in the unicorn round.

July, 2021: Grofers announces the Q-Commerce pivot

Zomato’s investment in Grofers had come just a month before the food delivery platform became one of India’s first new-age internet companies to list on the stock exchanges on July 23. For its part, Grofers took the fresh capital and forayed into what it called ‘instant deliveries’.

In a blog post on July 27, Grofers’ Co-Founder and CEO Albinder Dhindsa said, “Our work over the last 5 years allowed us the tools and the privilege of enabling an ecosystem that could promise to deliver groceries to every household in Gurgaon within 15 mins.”

In the pilot period, Grofers claimed to have delivered everyday essentials to over 7,000 households in Gurugram within 15 minutes though more than 900 delivery partners.

Our work over the last 5 years allowed us the tools and the privilege of enabling an ecosystem that could promise to deliver groceries to every household in Gurgaon within 15 mins.

Yesterday, over 7000 households experienced delivery within 15 mins. 🚀https://t.co/TbSD3l9A1y

— Albinder Dhindsa (@albinder) July 27, 2021

Aug, 2021: Grofers starts 10-minute grocery deliveries

After Zomato’s investment in Grofers for nearly 10 percent stake received the approval of the monopoly watchdog Competition Commission Of India (CCI), the e-grocer pushed the limit and announced the start of 10-minute delivery of over 7,000 daily essentials in 10 cities.

“While our average delivery times are still hovering around the 15 minute mark, our eventual vision is to be below 10 minutes for every customer in India,” said Albinder Dhindsa, Co-Founder and CEO, Grofers.

However, as Grofers’ 10-minute delivery model received severe backlash on social media platforms over concerns that it risked the lives of delivery partners, Dhindsa came out with an explanation to address ‘the hate’.

I want to chime in about the hate we are getting for delivering groceries in 10 minutes… pic.twitter.com/RNhFvd6ojV

— Albinder Dhindsa (@albinder) August 28, 2021

Sept, 2021: Zomato pulls the plug on grocery delivery, Banks on Grofers

In an early warning sign of how tough running a Q-commerce model would prove to be, Zomato wrote to its grocery partners, saying it intends to stop its pilot grocery delivery service on September 17. The reasons: order fulfillment gaps, poor customer experience and intensely-fierce competition.

Zomato said, “We have decided to shut down our grocery pilot and as of now, have no plans to run any other form of grocery delivery on our platform.

Crucially, it added, “Grofers has found high quality product market fit in 10 minute grocery and we believe our investment in the company will generate better outcomes for our shareholders than our in-house grocery effort.”

Nov, 2021: Zomato sees an ‘Inflection Point’ in Grofers’ 10-min model

As a part of its three-pronged long-term strategy, Zomato announced that it is going to build ‘the hyperlocal e-commerce ecosystem’ by investing and partnering with other companies to tap into growth beyond food, for which it planned to deploy USD 1 billion over 1-2 years.

In a blog post titled, ‘Inflection Point’, Zomato founder Deepinder Goyal said, “While we decided to not build quick-commerce on our platform, we are excited about the progress our partner company Grofers has made in the 10-min delivery space.”

Although there were reports that Zomato’s investment in Grofers was the first step towards a potential merger, Goyal for the first time stated his intentions. “As these businesses scale, we would want to be the provider of additional capital to these businesses and consolidate our stake leading to a potential merger at some point (at least in some cases, if and when the founders of these companies want to).”

December, 2021: Grofers rebrands itself to Blinkit for 10-min push

In a blogpost, Grofers announced that it is surging ahead as a new company with a new mission statement ‘instant commerce indistinguishable from magic’.

“We will no longer be doing this as Grofers, we will be doing it as Blinkit,” it said, with plans to take the total count of its dark stores across 12 cities to 350 by December in a greater push to deliver orders in about 10 minutes.

Here’s why we are temporarily closing down areas without 10-minute delivery service. @letsblinkit pic.twitter.com/7LT79vNEJY

— Albinder Dhindsa (@albinder) December 20, 2021

At that time, Grofers said it had a three million monthly order run rate, experiencing 5x growth, gaining one million quick commerce users. Given the response, the e-grocer even closed down its operations in areas where it could not deliver in 10 minutes.

Grofers is now Blinkit.

Delivering your everyday essentials in a blink of an eye. @letsblinkithttps://t.co/27oH7lHHj3

❤️💛 https://t.co/PYgLCixQZY

— Deepinder Goyal (@deepigoyal) December 13, 2021

Feb, 2022: Deepinder Goyal’s bullishness on Blinkit

Amid reports that Zomato and Swiggy held talks with the heavily-funded Zepto, Deepinder Goyal expressed high confidence in Blinkit while providing the Q3FY22 update. “We made cash investments worth ~$225 million in the past year across three companies – Blinkit (erstwhile Grofers), Shiprocket and Magicpin – towards our objective of building out quick e-commerce in India.”

“Of these investments, Blinkit is the closest to how we all know the quick commerce business today. Blinkit pioneered 10-minute grocery delivery in India post our ~$100 million investment in August 2021,” said Goyal.

“100% of Blinkit’s business now is in quick commerce format with a median delivery time of ~12 minutes,” he added. “We are very bullish on the product-market fit, unit economics, as well as the growth trajectory of the quick commerce category.”

However, Deepinder Goyal’s personal investments in some of the startups that Zomato had begun to back had turned into a ‘conflict of interest’ issue.

Thanks @TVMohandasPai for raising an important question. Please see the attached note – hopefully, this will give you more confidence in the principles and processes of governance being followed at Zomato.

Next time, please tag me directly on such queries and skip @sbikh https://t.co/HtgpBdC6xy pic.twitter.com/MjLgQL3aoP

— Deepinder Goyal (@deepigoyal) December 10, 2021

After selling his stake in one of Zomato’s investee companies Shiprocket, Goyal proceeded to sell his personal holdings in Blinkit to Tiger Global. As per reports, he had first invested about $94,000 in Grofers in 2015.

March, 2022: Zomato comes to Blinkit’s rescue with $150 million loan

Despite Zomato’s investment, Blinkit could not withstand the heat in the 10-minute delivery space, with the entry of deep-pocketed players such as Zepto. Dunzo had found the backing of Reliance Retail while Big Basket sheltered itself under Tata Group’s umbrella.

Amid reports of Blinkit laying off employees, shuttering dark stores and delaying vendor payments, Zomato decided to extend a $150 million loan in one or more tranches. A week later, Zomato had its own fire to douse after it announced the launch of its 10-minute food delivery service — Zomato Instant.

While explaining the rationale behind the controversial move, Deepinder Goyal made a reference to Blinkit. “…After becoming a frequent customer of Blinkit (one of Zomato’s investments in the quick commerce space), I started feeling that the 30-minute average delivery time by Zomato is too slow, and will soon have to become obsolete. If we don’t make it obsolete, someone else will.”

May, 2022: Zomato answers the many questions on Blinkit

In its letter to shareholders with the Q4 earnings update, through the fictional character of Ms Savvy, Zomato put the big question to itself: “What is the plan with Blinkit? There are media reports of a potential M&A, is that true?”

To which Deepinder Goyal said, “We continue to remain bullish on quick commerce, especially given how synergistic it is to our core food delivery business, and are excited with the progress that Blinkit has made in this space.

“While there is a lot to do as the business is at its early stages, there’s still a lot of low hanging fruit to drive growth and efficiency,” he said.

“Blinkit has grown well in the past six months, and has also significantly reduced its operating losses. We have committed to give them a short term loan of up to $150 million to fund their short term capital needs.”

So, $150 million of short-term loan, is that already given out or that’s yet to be given out? That was the question posed by a Goldman Sachs analyst during the earnings call.

Zomato’s CFO Akshant Goyal took the question and said, “Part of it is given out and part of it is pending. We’ll see if they need it. We’ve committed to it, but whether we really give them the money or not is a function of whether they need it or not.”

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Zomato to acquire instant service company Blinkit for Rs 4,447 crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Online food delivery platform Zomato Ltd on Friday said it will acquire Blink Commerce Pvt Ltd (formerly known as Grofers) for Rs 4,447.48 crore in a share swap deal as part of its strategy of investing in quick commerce business.

The company’s board at a meeting held on Friday has approved the acquisition of up to 33,018 equity shares of Blink Commerce Pvt Ltd from its shareholders for a total purchase consideration of Rs 4,447.48 crore at a price of Rs 13.45 lakh per equity share, Zomato said in a regulatory filing.

Blink Commerce Pvt Ltd runs the online quick commerce service under the Blinkit brand. It was formerly known as Grofers. This transaction will be carried out through issuance and allotment of up to 62.85 crore fully paid-up equity shares of Zomato, having face value of Re 1 each at a price of Rs 70.76 per equity share on a preferential basis, it added.

Also read: Zomato shares jump as investors await blueprint for Blinkit acquisition

The company already holds 1 equity share and 3,248 preference shares presently in BCPL, the filing said. Explaining the rationale behind the proposed acquisition of Blinkit, in a letter to shareholders, Zomato Founder & CEO Deepinder Goyal said, ”Quick commerce has been our stated strategic priority since the last one year.

“We have seen this industry grow rapidly both in India and globally, as customers have found great value in quick delivery of groceries and other essentials. This business is also synergistic with our core food business, giving Zomato the right to win in the long-term.” He further said, ”This foray into the next big category is timely as our existing food business is steadily growing towards profitability.”

On how Blinkit fits into the larger picture at Zomato, Goyal said Blinkit is also a hyperlocal business, just like food delivery and it also caters to a need for quick delivery of products for Zomato customers. “Quick commerce will help us increase the customer wallet share spent on our platform and also drive higher frequency and engagement from our customers,” he added.

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Post the completion of the acquisition, he said Blinkit and Zomato apps would continue to exist separately. “Zomato brand stands for everything ’food’ in customers’ minds, while Blinkit is on the path to becoming a brand that customers associate with grocery and essential supplies,” he said.

The Blinkit team, led by Albinder Singh Dhindsa will continue to run the business, Goyal said. As part of the transaction, Zomato will also acquire the warehousing and ancillary services business of Hands on Trades Private Ltd (HOTPL).

Zomato CFO Akshant Goyal said the transaction is expected to be closed in early August 2022 subject to shareholders’ and stock exchange approvals.

In March this year, the Zomato board had approved granting a loan of up to USD 150 million to Blinkit. Last year it had invested USD 100 million (Rs 745 crore) for acquiring around 9 percent stake in erstwhile Grofers. Zomato had stated its intention of investing up to USD 400 million in cash in quick commerce in India over the next 2 years.

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Exclusive | Zomato board to sign off Blinkit acquisition on June 17

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Zomato board will meet on June 17 to sign off the acquisition of quick commerce company Blinkit, according to two sources close to the developments.

Although the deal discussions earlier valued Blinkit at $700 million, the value of the final deal is expected to come down as it involves a stock swap of a definite number of shares in the ratio of 1:10 where Zomato would get 10 shares of Blinkit for every one of its shares. 

Zomato was trading at Rs 70.15 on the BSE at the time of filing the story, down from Rs 75-80 levels in March when reports about the acquisition emerged first.

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Moneycontrol had reported earlier that the food delivery major may not need the Competition Commission of India’s (CCI) nod to acquire the online grocer as it plans to use the so-called ‘de minimis’ exemption, which applies to deals below a certain size.

Zomato did not respond to queries regarding the developments. It is expected to notify the stock exchanges soon regarding the same.

In March this year, Zomato had extended a lifeline to cash-strapped Blinkit through a loan of $150 million to Grofers India Private Limited (GIPL). The food delivery company said in its earnings call recently that the entire amount had not been disbursed, and the rest will be given out depending on whether the company needs it.

“The interest rate for the loan will be 12 percent per annum or higher with a tenor of not more than one year. This loan will support the capital requirements of GIPL in the near term and is in line with our stated intent to invest $400 million cash in quick commerce in India over the next two years,” the listed foodtech company had said at the time in a filing with the exchanges.

In August last year, GIPL raised $100 million from Zomato in a round which gave the company a unicorn status. That deal had gone through the process of getting an approval from the CCI.

One of the sources also said that Zomato will acquire an Indian subsidiary of parent company Grofers International Pte Ltd, which is domiciled in Singapore. The company had shifted its headquarters in 2015 to the South East Asian country which boasted of lighter taxation regulations.

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The de-minimis exemption

Sources told Moneycontrol earlier that Zomato has received a legal opinion that recommends using the ‘de minimis’ exemption as Blinkit’s turnover is less than Rs 1,000 crore.

‘De minimis’ is a Latin phrase used to describe something that is not significant or important. According to a circular issued in 2016 by the Competition Commission of India, acquisitions where enterprises whose control, shares, voting rights, or assets are being acquired have assets of not more than Rs 350 crore in India or a turnover of not more than Rs 1,000 crore in India, are exempt from the regulator’s mergers and acquisitions norms for five years.

In other words, these M&A deals are “de minimis”, and so the parties involved don’t have to notify CCI or approach it for approval. The government extended this exemption by 5 more years till March 2027, in a bid to improve the ease of doing business. 

According to people in the know, this is not the first time that Zomato is using the de-minimis exemption for an acquisition. The Gurugram-based company’s acquisition of UberEats India, the food delivery arm of ride hailing giant Uber, in 2020 also invoked this provision to steer clear of the CCI.

However, the competition watchdog apparently did not take to it kindly as it launched a probe into the deal few months later. At the time, Moneycontrol had reported that the CCI was looking at two salient aspects of the deal — one, whether the deal was anti-competitive, thereby hurting consumers, and two, whether the two companies should have notified it about the transaction.

Zomato bought UberEats in exchange for a 9.99 percent stake in January 2020 and the deal was valued at around $206 million.

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Zomato-Blinkit sign deal for merger, to move CCI soon for approval

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Online food delivery firm Zomato and online grocer Blinkit has signed up for a merger in an all stock deal which is likely to be at a downround for a valuation of USD 700 million, sources privy to the development told Moneycontrol.

Blinkit last raised USD 100 million from Zomato in a round which gave the company a unicorn status.

The deal signals towards the beginning of a consolidation in the quick commerce space in India.

The public listed food-tech firm will be approaching the Competition Commission of India for an approval soon.

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Following the stock swap, Blinkit’s lead investor Softbank will get around 4 percent stake in Zomato. It must be noted that Softbank already is an investor in rival Swiggy.

This comes days after Moneycontrol reported that Zomato is extending a USD 75-USD 100 million loan to rescue cash-strapped Blinkit.

The development happens at a time when Blinkit has laid off employees, shuttered dark stores, and delayed some vendor payments, amid intense competition in the quick commerce space.

Zomato’s last investment in Blinkit happened for a 10 percent stake at a valuation of a billion dollars just before its initial public offering in July last year. While Blinkit was supposed to raise a further USD 500 million from Zomato, this hasn’t materialised due to current market conditions, where new-age tech stocks have been hammered.

Last month Blinkit also signed a term sheet with Innoven Capital for debt worth USD 10 million which is coming in three tranches. The company received Rs 25 crore in the first tranche last month.

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Blinkit laid staff from Mumbai, Hyderabad and Kolkata across segments such as riders, pickers and store managers. The company currently has over 2,000 people on its payroll and 30,000 ground staff. This layoff is likely to have impacted close to 5 percent of the overall strength.

This was an attempt to cut costs by Blinkit which spent Rs 600 crore between November and February to expand business and acquire customers in the cash-guzzling and deep-discounted grocery delivery space.

It currently has close to 445 dark stores after shutting down approximately 40 of them in the last couple of months.

In February Zomato said it had set aside USD 400 million to invest in quick commerce stating that this category offers a “huge addressable market” and is synergistic with its food delivery business.

Before that it made an investment of USD 225 million across Shiprocket, Magicpin and Blinkit.

It must be noted that Zomato was also in talks with Blinkit’s younger rival Zepto for an acquisition last year. The deal which was way above Zomato’s current budget sidelined for quick commerce, however, did not materialise then. The food-tech had offered Zepto a valuation of USD 1 billion.

Blinkit and Zomato didn’t immediately respond to Moneycontrol’s queries.

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Quick commerce companies on the rise; experts discuss market potential

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In recent times, quick commerce companies have raised huge amounts of money, amid rising valuations. From Grofers, which rebranded itself as Blinkit, to Zepto, Dunzo, among others have raised millions of dollars in the past two-three odd months.  Players like Zomato, Ola have all been forthcoming in investing money in the sector. To understand the dynamics of the sector, CNBC-TV18, spoke to Arvind Singhal, Chairman at Technopak Advisors, and Bijou Kurien, Chairman of Retailers Association of India (RAI) and Former President and CE of Reliance Retail.

First up, Singhal said that the quick service market may not be more than $2-3 billion. He isn’t even sure consumers are really wanting a quick delivery service in the first place.

“To me, the more fundamental question on the quick commerce aspect is, do the consumers want it or not?” he said.

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Kurien, meanwhile believes that quick delivery works for the top-up basket. He is of the opinion that the value of the basket is going to be much smaller for speed delivery players.

“The question is that when you think of the number of grocery trips a customer makes – a consumer makes several trips, they have large baskets, they have medium sized baskets, and they have top-up baskets and this is probably relevant fully in the case of top-up baskets. That last minute thing that you forgot, when you are in the middle of cooking a dish. The value of the basket is going to be much smaller,” said Kurien.

According to Kurien, quick service could be much beyond grocery. He believes there’s a need to define service levels as 10 or 20 minutes. He explained that such businesses need proper planning and one can stand to lose a fair amount otherwise.

“It is not an easy game at all. And it is not a game which is for the faint-hearted. Because this is going to be a very critical game, you can lose a lot of money very fast if you’re not careful about the way you plan this thing. But it is a need. However, it’s not a significant need at this point of time. The question is that how do you make it a significant need over a period of time and yet make it a breakeven model,” Kurien said.

“There certainly is going to be a great growth potential. Currently, when we think about it, we think about it only for groceries but think about it also for categories which go beyond grocery. In the case of Dunzo, and Reliance Retail, it’s a double benefit, because Reliance Retail itself has got a grocery business, it’s also got JioMart, where it services the needs of several customers. It’s got merchants as part of the larger network of fulfillment partners. Dunzo, being the delivery partner will certainly enable speedy delivery from its own stores, and from its merchant partner stores,” he added.

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“Many customers say that I need it fast. But do I need in 20 minutes? I am not so certain. So it’s a bit of a chicken and egg kind of thing. Unless provided, you really can’t realize demand and once you start realizing demand, the opportunity to grow is significant,” Kurien further said.

Watch the accompanying video for the full interview.

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Grofers rebrands itself as Blinkit

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Online grocery delivery platform Grofers on Monday said it is rebranding itself as ‘Blinkit’ to reflect its pivot to quick commerce. The Zomato and SoftBank-backed company had started its quick commerce service with a 10-minute delivery promise a few months ago.

“A few months ago, we started on a journey to build the future of commerce with 10 minute delivery of most of the stuff our customers need in their daily lives… We learnt a lot as Grofers, and all our learnings, our team, and our infrastructure is being repurposed to pivot to something with staggering product-market fit quick commerce,” Blinkit said in a blogpost. The blogpost added that the company is already processing over a million orders a week, across 12 cities in India under the service.

“Today, we are surging ahead as a new company, and we have a new mission statement ‘instant commerce indistinguishable from magic’. And we will no longer be doing this as Grofers we will be doing it as Blinkit,” the blogpost noted. Last month, Grofers had said it planned to open 150 dark stores by December, taking the total count to 350, for quick commerce to deliver orders in about 10 minutes. At that time, Grofers had said it had a 3 million monthly order run rate and had logged growth of 3.5 times in the last two months, while gaining one million quick commerce users.

While traditional e-commerce deliveries take a day or longer, quick commerce (or q-commerce) enables customers to get small quantities of goods to customers in a shorter period of time. According to a RedSeer report, the quick commerce sector in India is expected to grow to USD 5 billion by 2025 from the current USD 0.3 billion.

Quick commerce is growing in India on the back of trends like a shift in consumer behaviour, entry of big players like BigBasket and Grofers, and rise of instant delivery platforms, as per the report. Earlier this month, food delivery platform Swiggy had announced an investment of USD 700 million (about Rs 5,250 crore) in its express grocery delivery service, Instamart. Last month, Ola had also started piloting a quick delivery service for items like groceries in Bengaluru. Other players in the segment include the likes of Dunzo.

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Explained: The flipside of instant grocery delivery services

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Instant grocery delivery services have seen a boom of sorts over the past year. Amidst the COVID-19 lockdowns and movement restrictions, the convenience of having groceries delivered straight to our homes, at times within just 15 minutes, has been a major driver of their popularity.

In Europe and US, several startups like Getir, Gopuff, Jokr and Gorillas have set up numerous dark stores — mini warehouses that can support grocery delivery within 15 minutes or less. Closer home, services like Swiggy Instamart, Grofers, BigBasket and others are starting to capitalise on the attractiveness of instant grocery delivery.

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But convenience often comes at a hidden cost. And the first ones to feel the pinch are retail brick-and-mortar stores. As small stores are unable to compete with multi-million, and sometimes multi-billion dollar enterprises in terms of logistics and convenience, they have no choice but to go out of business. In the US, this has already translated into empty storefronts and vacant corner shops across once busy streets.

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More vehicles, less stores

The rise of delivery services also means that there are more vehicles on the city streets than before. Bicycles,  mopeds, scooters, bikes and other means in the future will continue to tax the infrastructure of each city, as delivery services try to cover each nook and cranny of the growing urban regions of the world. The environmental costs will be particularly high, as express delivery services necessitate the use of delivery vehicles being sent under full capacity.

Under the threat of such services, the urban fabric of community, which is often knitted around the areas of shopping, commerce and retail areas, gets unravelled.

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Cities like Singapore are already working on plans to restore some of their retail zones to their former glory by diversifying the use of building lots. But as the rise of ride-hailing services highlighted, policymakers must prepare to support the brick-and-mortar stores while also embracing the convenience of instant delivery services.

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