Zomato had been labouring at the food space for a decade and a half, but a company it bought just two years is might now be more valuable than its own business.
Zomato-owned Blinkit is now more valuable than the company’s food delivery business, a report by Goldman Sachs has said. “Blinkit’s per share implied value is larger than that for food delivery in our SOTP (sum of parts valuation), the report said. Goldman Sachs said that while Zomato’s food delivery business was worth Rs. 98 on a per share basis, grocery delivery arm Blinkit was worth Rs. 119.
Goldman Sachs says that Blinkit has rapidly outgrown its parent company. In March 2023, Goldman said that Zomato’s food business was worth Rs. 48 a share, while Blinkit was worth only Rs. 16. After Zomato’s first quarter results for FY24, it said Zomato was worth Rs. 58 per share, and Blinkit was worth Rs. 26. Just a quarter later, Zomato came to be worth Rs. 65 per share, while Blinkit was worth Rs. 47. The gap narrowed further after the third quarter results, with Zomato being worth Rs. 80, with Blinkit being worth Rs. 71. And now in April 2024, Blinkit has surged ahead of Zomato for the first time, being valued at Rs. 119 per share compared to Rs. 98 per share for Zomato.
This is a pretty impressive turnaround for Blinkit, which had begun operations all the way back in 2013 as Grofers. The company had plodded along till 2021, finding it hard to find a true product-market fit. Towards the end of the year, however, Zepto had burst on the scene, and had begun offering 10-minute grocery deliveries. Grofers clearly saw the potential in the model, and went all-in — it rebranded itself to Blinkit, and began delivering groceries in 10 minutes. It went as far as to stop delivering to areas where it couldn’t meet the 10-minute promise.
But in 2022, food delivery platform Zomato acquired Blinkit for $568 million in an all-stock deal. The deal was thought to be synergistic for both companies — their userbases largely overlapped, and both companies would be able to cross-sell products to each others’ audiences. Both companies would’ve also been able to share each others’ fleets, thus unlocking efficiencies.
Cut to just two years later, the acquisition appears to have proven to be a bit of a masterstroke for Zomato. Zomato had acquired Blinkit for $568 million, but it’s now likely worth around $12 billion as per Goldman Sachs’s calculations, which means that Zomato has earned itself a 24x return on its original investment. But there might be a need to be cautious — Blinkit, like other 10-minute grocery delivery players, is yet to report a profit, and these valuations are estimates based on future projections of growth and earnings. But as far as things currently stand, Zomato has found that its acquisition from 2022 might have become more valuable than the company itself.