What does the merger with Blinkit mean for Zomato and its shareholders?
Less than a year after investing $100 million in Blinkit for a 9.3% stake, Zomato is reportedly in talks to merge with the online grocery company in an all-stock deal. Blinkit shareholders will get a 10% stake in Zomato A Business Standard report said that Blinkit would be valued at around $750-800 million dollars, which is much lower than the unicorn status it had achieved last August with the funding round where Zomato participated. While Zomato says its core food-related businesses that include food delivery, dining-out and B2 supplies unit Hyperpure will remain its key focus, it wants to invest in building the ecosystem around the food delivery business so that the cost of running a better food delivery business goes down with time. While its Average Order Value has increased over the last three years to Rs 400, in Zomato’s own words, the food delivery business is only showing early signs of maturity. Zomato estimated that a 5% contribution margin in its food delivery business at the current scale can ensure break-even at the EBITDA level.
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