Blinkit Acquisition by ZOMATO

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In recent years, the e-commerce or fast commerce market in India has undergone a massive transformation. The introduction of giants such as Swiggy and Zomato, particularly in the food and beverage sector, i.e., the food tech sector, has changed the face of the industry as well as the ultimate consumers’ consumption patterns.

In addition, we live in an era of rapid food and supermarket delivery. Consumers no longer have to visit their local Kirana stores to look for their essentials while also waiting in long billing lines. This is the period of having products delivered to one’s door at their own time and convenience. Many firms in this area have tie-ups with local Kirana stores and also have large warehouses that can meet the needs of the end users.

Zomato has taken a significant step in this regard, and the new partnership with Blinkit is expected to provide food behemoth Swiggy stiff competition in this market segment.

Blend of Zomato with Blinkit

Blinkit, formerly known as Grofers, has just rebranded itself as a gateway for rapid supermarket delivery. It has achieved tremendous success by responding to clients’ needs by delivering groceries in 10 minutes or less. Blinkit’s average delivery time is about 12 minutes.

Zomato‘s $100 million investment in August 2021 provided a significant boost toward this goal. This transaction gave Zomato a 9.3 per cent ownership in Blinkit, which was valued at $1 billion.

The food aggregator will now increase its investment in Blinkit through a merger (or, more precisely, an acquisition), backed by the latter’s strong response in the instant grocery delivery segment in the form of customer retention, and increased order frequency, positive customer feedback, and so on.

What exactly is a term sheet?

The Zomato-Blinkit merger is documented in the form of a term sheet signed by both companies. A term sheet is a relatively non-binding document with a few binding provisions. Provisions relating to non-solicitation, secrecy, exclusivity, risk exposure, the date and manner of receiving money, and so on are examples of binding terms. Terms that may be difficult to renegotiate later are frequently negotiated in the term sheet. As a result, a term sheet establishes the framework and the primary alignment of the parties in working on or crafting the final acquisition.

What are the merger’s highlights?

  • The current position of the Zomato-Blinkit merger comes at a time when the latter is burning roughly $6-8 million per month and is also forced to lay off people in various segments such as riders, store managers, and pickers throughout key cities like as Mumbai, Kolkata, and Hyderabad. These layoffs account for over 5% of the company’s total workforce.
  • Blinkit presently employs over 30000 people on the ground and over 2,000 people on the payroll, and it operates approximately 445 dark businesses in 20 cities across the country.
  • The company has grown its operations to the tune of $450 million in yearly run-rate Gross Merchandise Value (GMV) and currently operates entirely through the fast commerce business model.

Blinkit investment and loan strategy on Zomato

  • Zomato had planned to invest $400 million in the rapid commerce segment over a two-year period, but this has yet to happen.
  • Zomato has also agreed to provide a $150 million loan (at a 12% interest rate) that will be disbursed in multiple tranches.
  • The persistent market volatility and Blinkit’s cash-guzzling business model have reduced the company’s valuation, which is estimated to be around $700-$750 million amid the proposed Zomato-Blinkit merger, as opposed to its previous valuation of $1 billion.

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