Fast delivery app Blinkit to merge with Zomato: Share swap deal could value Blinkit at $700-750m

Blinkit’s merger comes at a time when it is struggling to raise cash, forcing it to lay off employees and close warehouses.

Online food delivery unicorn Zomato is in talks to acquire 10-minute grocery delivery platform Blinkit (formerly Grofers), in a stock swap deal, which will likely price this last at around $700 million to $750 million, a person with knowledge of the deal told FE.

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

Blinkit’s merger with Zomato comes at a time when it is struggling to raise cash, forcing it to lay off employees and close its warehouses to conserve cash.

On Tuesday, Zomato announced a $150 million debt investment in Blinkit to help the struggling grocery delivery startup meet its debts to suppliers and other creditors. In a filing with the exchanges Tuesday evening, Zomato said its $150 million loan to Blinkit will be disbursed in installments with an annual interest rate of 12%.

“The proposed investment is subject to the fulfillment of certain customary conditions precedent and other terms and conditions agreed under the investment agreement signed between the parties; and the granting of a loan until the equivalent of $150 million to Grofers India Private Limited in one or more tranches and has delegated authority to senior management of the company to decide key loan terms and execute final documents at a later date. The interest rate for the loan will be 12% per annum or more with a term not exceeding 1 year.This loan will supplement GIPL’s short-term capital requirements and is consistent with our stated intention to invest up to $400 million in cash in rapid trade in India over the next two years,” Zomato said in the filing.

A Zomato spokesperson declined to comment. Several calls and text messages to Blinkit CEO Albinder Dhindsa went unanswered until it was time to go to the press.

Before that, Zomato had also invested around $100 million in Blinkit in August last year. At that time, Zomato said it planned to invest a total of $400 million in 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 possible merger in the works.

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

Zomato’s merger with Blinkit comes at a time when online grocery services are seeing high demand, with 10-minute grocery delivery apps mopping up most of the funding. The pandemic has pushed more people to shop online and analysts believe the trend is here to stay. Industry experts say India had around 154 million households transacting online as of CY20, with 130 million already using online grocery platforms or ready to try.

Tier 2 cities and beyond will be the next frontier of growth for players in the segment. After the pandemic began in March 2020, Zomato had introduced grocery services on the app, but discontinued them after the food delivery business recovered.

Zomato is actively exploring the online grocery space, which the company sees as a “great opportunity.” Last year, company executives said the strategy behind the company’s investment in Grofers was to gain greater exposure to the space and build a strategy around the grocery sector. in line.

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