Blinkit is set to merge with online food aggregator and delivery platform Zomato that will result in the quick commerce company losing its unicorn tag in less than a year and may dampen investor euphoria around the concept of 10-minute delivery service model.
The transaction involves an all-stock deal that values Blinkit between $700 million and $800 million, two people familiar with the development told VCCircle.
This means Blinkit (formerly Grofers) will lose its unicorn status it had achieved last year after getting over $120 million from Zomato and existing investor Tiger Global Management, Mint reported in August. Unicorns are private companies with a valuation of at least $1 billion and Grofers was one of the over 40 unicorns created in India last year.
The merger with Zomato is expected to be completed in 60 days, the people said. SoftBank, which had a 40% stake in Blinkit, will approximately get a 4-5% stake in Zomato as part of the transaction while Tiger Global and Sequoia Capital will get additional shares in the entity, they added without disclosing further details.
An email sent to Zomato, Blinkit, Softbank, Sequoia and Tiger Global did not elicit an immediate response.
In a late filing with the stock exchanges on Tuesday, Zomato said that it will extend loan of $150 million to Blinkit in one or more tranches.
"This loan will support the capital requirements of Grofers India Pvt Ltd in the near term and is in line with our stated intent of investing up to $400 million cash in quick commerce in India over the next two years," it added.
Blinkit's short lived unicorn status is expected to not just raise questions about the cash guzzling quick commerce industry but may also cast a shadow over the startup ecosystem after a euphoric 2021 on the back of big-bang initial public offerings (IPO) of technology startups, large mergers and acquisitions (M&As), and an accelerated pace of creation of unicorns. Zomato itself became the first tech unicorn to be listed on the bourses last year.
After achieving the unicorn status last year, Blinkit's co-founder and chief executive Albinder Dhindsa told Mint that it is undergoing a massive transition as it sought to bet big on making all deliveries under 10 minutes. Soon, it rebranded itself to Blinkit to focus on its pivot to quick commerce in December. Meanwhile, new and older startups also joined the quick commerce bandwagon as 10-minute delivery service became the buzzword. For instance, Zepto, a 10-minute grocery delivery app founded by 18-year-old dropouts of computer science degree course at Stanford University last year, raised $100 million (around Rs 758 crore) in a Series C funding round led by American technology startup accelerator Y Combinator’s Continuity Fund in December. This funding round came 45 days after the company announced its $60 million fundraise in November. Earlier this year, Ola also rebranded its quick commerce business as Ola Dash.
With competition rising, trouble soon started to plague Blinkit. The company has reportedly laid off employees, shuttered dark stores, and delayed some vendor in the payments in the past weeks.
By merging Blinkit with the company, Zomato has underlined its commitment to the quick commerce space. In fact, its investment in Blinkit last year also meant Zomato would be bringing groceries back on to the platform, after discontinuing it in 2020.
In its third quarter earnings report, Zomato said that it is aggressively growing quick commerce segment and will invest $400 million over next two years in the category.
"Blinkit is the closest to how we all know the quick commerce business today. Blinkit pioneered 10-minute grocery delivery in India post our $100 million investment in August 2021," it noted.
It said that Blinkit scaled rapidly to $450 million annual run rate gross merchandise value (GMV) (January 2022 annualised) and now operates with over 400 dark stores across 20 cities in India.
"100% of Blinkit's business now is in quick commerce format with a median delivery time of 12 minutes," it added.
Deepinder Goyal, co-founder and CEO, Zomato had sold his personal stake in Blinkit to Tiger Global Management. in February.