acquisition of quick commerce company Blinkit for Rs 4,447 crore in an all-stock deal on Friday will add a significant addressable market for the firm, wrote the company’s cofounder and CEO Deepinder Goyal in a letter to his shareholders.
The acquisition comes at a time when
is trying to enter the quick commerce foray while achieving growth profitability. Blinkit has visibility into inventory owned by third-party distributors and retailers across product categories, in
a network of warehouses and distributed dark stores.
“This foray into the next big category (quick commerce) is timely as our existing food business is steadily growing towards profitability. Zomato has grown at a CAGR of 86% in the last 4 years to adjusted revenue of $710 million (Rs 5,554 crore), while the adjusted Ebitda margin has improved from (153%) in FY19 to (18%) in FY22,” Goyal said in the letter.
Zomato defines adjusted Ebidta as Ebidta minus the share-based payment expenses.
As per the letter, Blinkit’s business pivoted to 100% quick commerce in January 2022 after the SoftBank-backed firm – earlier known as Grofers –
rebranded itself late last year.
In May this year, Blinkit’s gross order value (GOV) peaked at Rs 402.8 crore – nearly one-fifth of Zomato’s monthly average food delivery GOV in the final quarter of fiscal year 2022. Additionally, the monthly order frequency of Blinkit was 3.5 times in May 2022 and higher than that of Zomato.
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The CEO also said Blinkit’s GOV was fast catching up with Zomato’s GOV in some key markets. “This indicates that quick commerce will add a significant new addressable market to our business in the long term. In a sample market like Gurugram, Blinkit GOV is already nearly 63% of Zomato’s food delivery GOV.”
As per the shareholder letter, Blinkit had a revenue of Rs 22.1 crore in January. This has jumped to Rs 58 crore as of May.
Blinkit’s revenue includes its marketplace commission income, customer delivery charges, advertisement revenue, warehousing, and ancillary services income.
CEO Deepinder Goyal pointed out that Zomato will increase the customer wallet share spent on the platform and also drive higher frequency and engagement from customers with quick commerce.
Zomato’s chief financial officer (CFO) Akshant Goyal said in the note that by tapping into quick commerce via Blinkit, Zomato will increase the addressable market.
“This (Blinkit deal) will increase the potential profit pool and make the business more defensible. The peak demand times for food delivery are complementary to the quick commerce demand peaks in non-meal times. This will help increase our hyperlocal delivery fleet utilisation, and reduce the cost of delivery,” the CFO said.
According to him, a primary reason for Zomato to acquire Blinkit and not get directly into the quick commerce sector was Blinkit’s proprietary tech platform, the scale of business, relationships with third-party brands and sellers, and the warehouse and dark store network.
“Blinkit’s proprietary technology is key to optimising delivery network and operations,” the CFO added.
According to RedSeer, the total commerce market in India is $1.3 trillion, and Zomato considers quick commerce to become a significant channel of demand for customers.
