In the blink of an eye: Zomato-owned firm Blinkit's quick turnaround

In 2022, Zomato acquired Blinkit in a $569 million all-stock deal, which was perceived to be a distress sale. Earlier, in 2021, it had acquired a 9 per cent stake in Grofers, as Blinkit was known at that time, for $100 million.Back then, Deepinder Goyal, founder and chief executive officer (CEO) of Zomato, had said quick commerce was a priority because it had growth potential.
 

On Monday, in a letter to shareholders, Deepinder Goyal reminisced: “We are just grateful that the bet we took on Blinkit worked out just fine, and we are not at a point where Akshant (Goyal, chief financial officer, Zomato) and I are getting fired for an expensive acquisition gone wrong.”
 

Looking at the numbers revealed as part of Zomato’s results, Blinkit is working out better than “just fine”. It turned operationally profitable in March, and there is more.
 

GOV on the double
 

Blinkit’s gross order value (GOV) — a measure of the money earned on each trip — doubled in the fourth quarter (Q4) of 2023-24 compared to Q4 of 2022-23. Sequentially, compared to the preceding quarter, the growth was 13.7 per cent.
 

In food delivery, Zomato’s core business, the GOV grew 28 per cent. But sequentially, it was marginally down — by 0.6 per cent.

 

A Goldman Sachs report predicts that Blinkit will reach adjusted Ebitda (earnings before interest, tax, depreciation, and amortisation) breakeven by the June quarter of 2024, with a 5.8 per cent Ebitda margin as a percentage of GOV, higher than the 5.3 per cent margin forecast for food delivery.
 

What is aiding Blinkit’s GOV growth is the addition of non-grocery products, a category that now encompasses air-coolers, luggage products, and beauty products such as MyGlamm’s Pout lipsticks by Karan Johar.
 

Growth centres
 

Blinkit is present in 26 cities but focuses on the top eight for expansion. The National Capital Region (NCR) of Delhi is its biggest growth driver, where the GOV was Rs 1,748 crore. Bengaluru’s GOV, in comparison, was less than a third, at Rs 485 crore. The average of the next six cities was Rs 193 crore.
 

This is also reflected in the number of stores. New Delhi has 178 and Bengaluru 62.
 

“The job for us over the next few quarters is to get Bengaluru and other large cities like Mumbai and Hyderabad to the penetration of Delhi-NCR, both in terms of store footprint and GOV,” said Albinder Dhindsa, founder and CEO of Blinkit, in a letter to shareholders.
 

Store drive
 

Blinkit is expanding its store footprint to 1,000 by the end of 2024-25 (FY25). This is doubling from its current base of 526 (as of March 31 this year). It added 75 stores in January-March alone. “For comparison, this is  more than the number of stores we added in the three preceding quarters cumulatively,” said Dhindsa.
 

For the first quarter of FY25, the company aims to add 100 stores and touch 1,000.
 

According to the Goldman Sachs report, if quick commerce players restrict their presence to the top 50 cities in India, the entire market can be served with 900-1,000 dark stores per platform.
 

Looking at these numbers and where Blinkit has reached, one wonders if Deepinder Goyal had envisaged the turn of events during the fire sale.
 

“It feels like we have lost the right to screw up or make mistakes. Our journey in the last two years has, in so many ways, increased the expectations our stakeholders have from us, and we will try our best to live up to them,” added Deepinder Goyal in his letter.