Zomato to acquire grocery delivery platform Blinkit for Rs 4447 crore: All you need to know

New Delhi: Zomato, a food delivery platform, has agreed to purchase instant grocery company Blinkit in an all-stock deal for Rs 4,447 crore ($569 million), as it tries to capitalise on a rapidly increasing market for quick grocery delivery.

According to a regulatory filing, Zomato would offer up to 629 million shares, representing a 6.88 percent ownership stake on a fully diluted basis, at an allotment price of Rs 70.76 per share. Before the transaction was announced, Zomato shares finished at Rs 70.35 on the BSE, up 1.15 percent.

HOTPL, Blinkit's storage and auxiliary services business, was also acquired by Zomato for $8 million. It would not, however, acquire the B2B trading firm because it no longer fits into its strategic ambitions, according to the company.

According to a report, Japan's SoftBank, which owns 46 percent of Blinkit, would receive a 3.2 percent ownership in Zomato as part of the purchase. Tiger Global Management will own around 1.3 percent of Zomato, with Sequoia Capital owning an additional 0.5 percent.

Other Blinkit (formerly Grofers) investors who stand to gain new Zomato shares include Korea's KTB Ventures, Yuri Milner's Apollete Asia, and Bennett Coleman & Co. Ltd.

The Blinkit acquisition highlights the hyper-competitive and cash-hungry character of the fast commerce industry. Blinkit was one of almost 40 unicorns born in India last year. A unicorn is a startup with a valuation of $1 billion or more.

"While the statutory lock-in period is six months, we have negotiated a 12-month lock-in period for selling Blinkit stockholders," Zomato noted.

In a blog post, Zomato's founder and CEO, Deepinder Goyal, stated that rapid commerce has been the company's strategic objective since last year, when it first invested in Blinkit. "This market has grown significantly, both in India and abroad, as customers have discovered great value in speedy delivery of groceries and other necessities." This company is also synergistic with our main food business, offering Zomato a long-term advantage," he added.

Dhindsa will continue to be the market leader in rapid commerce. The transaction is expected to close in August.

The agreement will provide assistance to Blinkit as competition in rapid commerce has increased. Earlier this year, Blinkit reportedly fired off employees, closed dark storefronts, and delayed certain vendor payments.

According to Zomato, Blinkit's losses fell dramatically between January and May as a result of operating leverage and improved execution.