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Zomato, online grocery company Blinkit in talks for a merger deal
Blinkit last raised $100 million from Zomato in a round which gave the company a unicorn status.

Online food-delivery platform Zomato has held discussions to acquire Blinkit, formerly Grofers, in a share-swap deal, multiple people briefed on the matter said. This comes on the back of Zomato investing $100 million in the Gurgaon-based quick-commerce startup last year, picking up an about 10% stake.

Blinkit rebranded itself late last year as its Chief Executive Officer promised to speed up deliveries of everything from groceries to electronics in a burgeoning market dominated by Walmart’s Flipkart and Amazon’s local unit.

Zomato Nears All-Stock Takeover for Blinkit
Image: The Tech Outlook

The pared-down valuation indicates Blinkit (run by Grofers India Pvt. Ltd) may be struggling to sustain the 10-minute delivery of groceries. The loss of the unicorn tag in less than a year may also dampen investor euphoria around cash-guzzling quick-commerce startups.

“Zomato has been working on the deal since the start of the year but the company is yet to publicly inform the exchanges on the merger deal,” the person added.

On Tuesday, Zomato announced an investment of $150 million into Blinkit in form of debt to help the struggling grocery delivery start-up to meet its dues to vendors and other creditors. In a filing with the exchanges on Tuesday evening, Zomato said that its $150-million loan to Blinkit will be disbursed in multiple tranches with a 12% annual interest rate.

Zomato Filing

“The proposed investment is subject to fulfillment of certain customary conditions precedent and other terms and conditions agreed under the investment agreement executed between the parties, and grant of loan up to rupee equivalent of $150 million to Grofers India Private Limited in one or more tranches and delegated the authority to the senior management of the company to decide the key terms of the loan and execute the definitive documents at a future date.

The interest rate for the loan will be 12% per annum or higher with a tenor of not more than 1 year. This loan will supplement the capital requirements of GIPL 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,” Zomato said in the filing.

Emails sent to spokespeople for Zomato, Blinkit, SoftBank, Sequoia, and Tiger Global did not elicit an immediate response.

The quick-commerce company, which pioneered the 10-minute delivery of groceries with the help of so-called dark stores, was one of the more than 40 unicorns, or startups valued at more than $1 billion, created in India last year.

Zomato’s takeover of Blinkit is expected to be completed in 60 days, the people said. SoftBank, which had a 40% stake in Blinkit, will 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 said, without disclosing further details.

Blinkist’s down round indicates that startups are increasingly finding it difficult to raise funding on favorable terms amid the geopolitical tensions in Europe and major central banks starting to wind down ultra-easy monetary policies and raise interest rates.

Other Investment

Besides Blinkit, Zomato has also announced a 16.66 percent stake acquisition for $5 million in robotics firm Mukunda Foods. Mukunda is a food robotics company that designs and manufactures smart robotic equipment to automate food preparation for restaurants.

Their products enable restaurants to scale while maintaining consistency in food quality and customer experience across multiple outlets.

In February, Zomato said it had set aside $400 million to invest in quick commerce stating that this category offers a “huge addressable market” and is synergistic with its food delivery business.