Zomato and Blinkit reach agreement for merger

Food delivery firm Zomato and instant delivery service Blinkit have reached an agreement for a merger, a source familiar with the matter told TechCrunch. The all-stock deal values Blinkit between $700 million and $750 million, the source said, requesting anonymity as the matter is private.

The merger — or technically, an acquisition — comes at a time when Blinkit has been struggling to raise funds from new or most of its existing investors for several quarters. The SoftBank-backed startup, which was formerly called Grofers, pivoted to instant grocery delivery last year.

Earlier this year, Blinkit shut many of its dark stores and scaled down the business in many cities as it pledged to focus more aggressively on 10-minute grocery deliveries and said if its orders can’t reach the customers in 10 minutes, it will not serve in those cities.

The startup, which had raised about $700 million and was last valued at over $1 billion, was struggling to compete with younger and heavily-backed firms Swiggy, which also counts SoftBank among its investors, and YC Continuity-backed Zepto.

Swiggy, which is India’s most valuable food delivery startup and is looking to go public next year, said earlier this year that it will invest $700 million in its instant delivery service, called Instamart. In January, its instant delivery service was on track to reach an annual GMV run rate of $1 billion in the next three quarters, the firm said.

Zomato, which is already an investor in Blinkit, had conversations with the younger startup for a full acquisition last year, TechCrunch reported earlier.

From our earlier coverage:

The leadership teams at Grofers and Zomato have long been close friends and began exploring this investment earlier this year. Both the firms are also open to the idea of Zomato acquiring a majority stake in Grofers in the coming quarters, though a decision hasn’t been reached and won’t be fully explored until Zomato becomes a publicly traded company, the source told TechCrunch.

Zomato, which acquired Uber’s Indian food delivery business early last year, has told some of its major investors that it envisions a future where the Gurgaon-based firm has expanded much beyond the food delivery category, the source said, requesting anonymity as the talks are private.

The two firms will need to get the approval from the Indian antitrust watchdog Competition Commission of India for the deal.

In Blinkit, Zomato will find a partner that can finally give it a play in the instant grocery delivery space — or grocery altogether, two areas Zomato has previously attempted to sink its teeth in but failed each time.

A look at India’s quick-commerce market. (Bernstein)

“India is leading other global markets in terms of quick commerce adoption. Quick commerce penetration as a percentage of online grocery is ~13% vs China (~7%), Europe (~3%). Average delivery time in India (~25 mins) comparable with global standards China (~30 mins) & Europe (~20 mins),” analysts at Bernstein said in a report last month.

“Addressable opportunity (TAM) of ~$ 45 Bn indicates a large headroom for growth. This is estimated based on a Grocery market of $ 620 Bn in India. Serviceable market is metros/Tier1 cities (~17%). Mid to high income households (~60%) are more receptive to Quick commerce with most the orders being top-ups (~70%),” they added.