What Analysts Make Of The Deal

Zomato plans to acquire Blinkit, building on synergies it sees in the food and grocery delivery businesses. But analysts expect a “roller-coaster” in quick commerce, delayed path to profitability and high convenience fees.

Zomato will buy 100% in the grocery delivery startup formerly known as Grofers for Rs 4,447 crore in an all-stock deal. It held around 9% in Blinkit.

In a shareholders’ letter, Zomato said the two brands will be kept and run separately. But it remained evasive on when it sees profitability for Blinkit citing “the early stage of the business”.

“It’s very hard to commit to a timeline for profitability. We expect that a meaningful number of the dark stores should become contribution break-even within the next year or so. Overall profitability will also be a function of how aggressively we expand and open new dark stores,” Zomato said in the letter. “It’s possible that this business becomes adjusted Ebitda break-even in less than three years. This is an educated guess at this stage and not a guidance.”

For the food delivery business, however, Zomato said the path to profitability remains unhampered.

“Our food business is trending towards profitability faster than what we had thought at the time of our IPO. We will now get to profitability within the same timelines but with a much larger addressable market. We are also not envisaging any further capital-raise to get to profitability in this timeframe.”

Shares of Zomato Ltd. closed 1.1% higher on Friday before the Blinkit deal was announced. Of the 19 analysts tracking the company, 15 maintain a ‘buy’ and two each suggest a ‘hold’ and a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 24%.

Here’s what analysts made of the Zomato-Blinkit deal: