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Things You Need to Know About Zomato and Blinkit Merger

Online food delivery platform Zomato is said to be considering a merger with instant delivery platform Blinkit (previously known as Grofers). It is believed that the talk for the merger is at an advanced stage and that the companies are going to approach the Competition Commission of India for the proposed merger.

Last July, before coming out with the IPO, Zomato had invested $100 million in Blinkit at a valuation of a billion dollars, making Blinkit a unicorn. Blinkit was supposed to have another round of capital raising but the difficult market conditions, especially for these new e-commerce and technology companies have derailed those plans.

Last December, Blinkit had announced 10-minute grocery delivery and entered the quick commerce space with a bang. Now, Blinkit is facing a cash crunch and it has laid off employees, shut some dark stores and is said to be delaying vendor payments. To ease these liquidity concerns, Zomato has offered a credit line to the tune of $150 million to Blinkit a few days back.

Food delivery companies are taking this quick delivery business very seriously and Zomato has said in February that it is setting aside a whopping sum of $400 million to invest in the quick commerce business as this is supposed to give synergetic benefits to the food delivery business of Zomato. It is worth mentioning here that earlier Zomato had tried to acquire Zepto – another instant delivery platform but the talks failed and no deal materialized.

The proposed deal is said to be at a valuation of $750-800 million, which is lower than the unicorn valuation at which Zomato invested in Blinkit. This diminution reflects the problems being faced by Blinkit in recent times. This said deal would be an all-stock deal, that is, the shareholders of Blinkit will get the shares in Zomato and it is said that the Blinkit shareholders may get up to 10% shares in Zomato.

The next few weeks would give us a clear idea about what is exactly going to happen with these two companies. Food delivery and instant grocery delivery segments are witnessing intense competition and this proposed deal may start the consolidation process in the grocery delivery service. It is worth mentioning that Zomato is still burning cash and it has not yet turned profitable.