Blinkit’s merger move comes at a time when it struggles to raise funds, forcing it to lay off employees and close warehouses.
Zomato is in talks to acquire 10-minute delivery platform Blinkit (formerly Grofers), in a stock swap deal, which will likely value the latter at around $700-750 million, a person who was aware of the deal told FE .
Zomato has been working on the deal since the beginning of the year, but the company has yet to publicly inform the exchanges about the merger agreement.
Blinkit’s merger move with Zomato comes at a time when it struggles to raise funds, forcing it to lay off employees and close its warehouses to save money.
On Tuesday, Zomato announced a $150 million investment in Blinkit in the form of debt to help the struggling grocery delivery startup meet its obligations to suppliers and other creditors. In a filing with the exchanges on Tuesday evening, Zomato said the $150 million loan to Blinkit will be disbursed in multiple tranches with an annual interest of 12%.
“The proposed investment is subject to the fulfillment of certain customary conditions precedent and other terms and conditions agreed upon under the investment agreement entered into between the parties; and granting a loan of up to $150 million rupee equivalent to Grofers India Private Limited in one or more tranches and delegated authority to senior management of the company to determine the principal terms of the loan and finalize documents on a to be performed at a future date. The interest rate for the loan will be 12% per annum or higher with a term of no more than 1 year. This loan will complement GIPL’s capital requirements in the near term and is in line with our stated intention to invest up to $400 million in cash over the next two years in high-speed trading in India,” Zomato said in the filing.
A Zomato spokesperson declined to comment. Multiple phone calls and texts sent to Blinkit CEO Albinder Dhindsa went unanswered until it went to the press.
Before that, Zomato also invested about $100 million in Blinkit in August of last year. At the time, Zomato said it plans to invest a total of $400 million in Blinkit, some of which would be structured as convertible bonds. Zomato acquired a 9.3% stake in Blinkit at the time, but also hinted at a possible merger in the works.
According to a Moneycontrol report on Tuesday, Zomato is expected to apply for approval from the Competition Commission of India (CCI) shorty. The report added that under the term sheet, Blinkit’s lead investor SoftBank is expected to gain a 4% stake in Zomato through the merger.
Zomato’s merger with Blinkit comes at a time of high demand for e-grocery services, with 10-minute grocery delivery apps taking up the bulk of the funding. The pandemic has pushed more people to shop online and analysts believe the trend will continue. Industry experts say that at CY20, India had an estimated 154 million households transacting online, of which 130 million were already using or are willing to try electronic messaging platforms.
Tier two cities and beyond will be the next growth barrier for the segment players. After the outbreak of the pandemic in March 2020, Zomato had introduced grocery items to the app, but discontinued it after food delivery operations got back on track.
Zomato is actively looking at the e-grocery space that the company says is a “great opportunity”. Last year, company executives had said the strategy behind the company’s investment in Grofers was to raise awareness of the space and build a strategy around the e-grocery.
This post Fast delivery app Blinkit to merge with Zomato: Share swap deal values Blinkit at $700-750 million was original published at “https://www.financialexpress.com/industry/quick-delivery-app-blinkit-to-merge-with-zomato-share-swap-deal-may-value-blinkit-at-700-750-million/2462131/”