Zomato, online grocery company Blinkit in talks for a merger deal

Zomato and online grocery firm Blinkit (formerly Grofers) are in talks for a merger deal, according to sources aware of the development, even while the food delivery platform in a regulatory filing on Tuesday said it has extended a loan of $150 million to Grofers India.
 

Sources say what is under discussion is a share-swap deal in which Blinkit would be valued at around $750-800 million. Shareholders and investors of Blinkit will get around 10 per cent in Zomato. SoftBank, which has 40 per cent stake in Blinkit, will get around 4-4.5 per cent shareholding in the merged entity.
 

Sources say they are hopeful that the final contours of the deal will be wrapped up in 45 days, however, Zomato will continue to offer the company loans to run its business.
 

A spokesperson for SoftBank declined to comment on this. 
 

An email sent to Zomato did not elicit any response till the time of going to press.
 

Attempts made reach Blinkit failed.
 

Zomato in a BSE regulatory filing stated that the company has extended a loan at an interest of 12 per cent per annum or higher with a tenor of not more than a year, and will be given in one or more tranches.
 

Zomato in the filings said: “…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 loan amount is in line with Zomato’s stated announcement of investing up to $400 million cash in quick commerce in India over the next two years.
 

Zomato already holds around 10 per cent equity in Blinkit. In June last year, Zomato had invested $100 million in the online grocery player that had catapulted both firms into the unicorn club.
 

Zomato also stated it has acquired 16.66 per cent equity in Mukunda Foods for a consideration of $5 million. 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 rapidly while maintaining consistency in food quality and customer experience across multiple outlets.
 

Zomato in the past has stated it would continue to invest in its core food business and quick commerce. The upper band of its potential investments in this category was $400 million cash over the next two years.
 

 In July last year, the food delivery company had invested $100 million (around Rs 745 crore) for acquiring minority stake of over 9 per cent in Grofers — which later rebranded as Blinkit as it pivoted to quick commerce.
 

However, the investment and the merger, if they happen, come at a time when reports have emerged that Blinkit is shutting down several of its dark stores.

India’s quick commerce segment has in recent times seen competition hotting up.

India’s quick commerce market is all set to grow 15x by 2025, reaching a market size of close to $5.5 billion, leading other markets (including China) in terms of quick commerce adoption, said home-grown management consulting firm RedSeer.