Zomato board likely to approve Blinkit acquisition; stock rises 3%
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Shares of food delivery company Zomato extended its gaining streak for the third straight session and rose 3% in opening trade on Thursday amid buzz that its board is likely to approve the acquisition of e-grocery startup Blinkit (formerly Grofers) in a meeting on Friday, June 24. The company in a regulatory filing on Monday said its board would discuss a potential acquisition in the meeting, but it did not disclose details.
Zomato shares opened a tad lower at ₹67.50 as compared to the previous closing price of ₹67.55 on the BSE. Reversing opening losses, the stock gained as much as 2.96% to touch a high of ₹69.55 in the first hour of trade so far. In comparision, the BSE benchmark Sensex was trading 370 points higher at 52,193 levels. The stock has been gaining for the last three sessions and rose more than 6% during this period.
“A meeting of the board of directors of Zomato is scheduled to be held on Friday, June 24, 2022, to discuss a potential acquisition transaction by the Company, the consideration for which may be discharged through the issuance of equity shares of the Company by way of a preferential issue,” it says in a BSE filing.
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As per reports, the deal is likely to value SoftBank-backed Blinkit at around $700 million. Last year, the company had invested $100 million (around ₹745 crore) for acquiring around 9% stake in Blinkit, a move which is seen as an attempt to enter into online grocery retail, a business segment that has seen robust growth during the Covid-19 pandemic. The transaction has been already approved by the Competition Commission of India (CCI).
In March, Zomato’s board approved granting a loan of up to $150 million (around ₹1,145 crore) to Blinkit. The interest rate for the loan was 12% per annum with a tenor of not more than 1 year. This loan intended to support the capital requirements of Blinkit in the near term and was in line with Zomato’s commitment to invest up to $400 million cash in quick commerce in India over the next 2 years.
In December last year, Grofers rebranded itself as Blinkit, as the company moved away from scheduled grocery deliveries to position itself as a quick commerce brand. The online grocery firm started a 10-minute delivery model in certain cities amid growing competition in the quick commerce space, with established startups like Swiggy, Dunzo and new players like Zepto betting big on the category.