Zomato’s Blinkit Soars: From Acquisition Gamble to Biggest Segment

Blinkit, a quick commerce company acquired by Zomato in 2022, has undergone a remarkable transformation. Once seen as a risky investment, Blinkit’s valuation has now surpassed that of Zomato’s core food delivery business, marking a significant turnaround.

From Acquisition Doubt to Upward Trajectory

Back in 2022, Zomato’s decision to acquire Blinkit (formerly Grofers) was met with skepticism by investors. The stock price plummeted 20% in response, reflecting concerns about the deal. However, Zomato remained confident in its acquisition strategy, and Blinkit’s recent performance appears to be justifying that confidence.

Blinkit’s Valuation Explodes

Since its acquisition for $568 million, Blinkit’s implied valuation has skyrocketed to a staggering $13 billion, according to Goldman Sachs analysts. This represents an impressive 6x increase year-over-year. This surge in valuation is attributed to Blinkit’s improved performance.

Blinkit Now Leads the Pack

Goldman Sachs highlights this shift in Zomato’s internal structure. Their “sum of the parts” (SOTP) analysis reveals that Blinkit, with a valuation of $13 billion, now constitutes Zomato’s largest segment, contributing the most to its overall market capitalization of $20 billion. Food delivery, Hyperpure, and Dining Out are Zomato’s other business divisions, but Blinkit has emerged as the clear leader.

Upward Revision for Blinkit

Goldman Sachs has also revised its earlier estimate of Blinkit’s valuation upwards. Their initial estimate of $8 billion (as reported in April) has been increased to $13 billion. This upward revision is based on Blinkit’s higher gross order value (GOV) estimates, which are currently tracking 50% higher than projections made a year ago.

A Thriving Quick Commerce Market

The bullish outlook for Blinkit is further bolstered by the promising future of the quick commerce industry. Currently operational in less than 30 cities, quick commerce platforms have the potential to expand to 40-50 cities in the coming years. According to Goldman Sachs’ analysis, these cities represent a combined potential addressable market (TAM) of $150 billion for quick commerce in 2023.

Quick Commerce Grabbing Market Share

The online grocery industry in India is currently estimated at around $11 billion as of FY24. Quick commerce platforms like Blinkit are capturing a significant share of this market, accounting for roughly $5 billion in GOV. Goldman Sachs predicts that the quick commerce segment will continue to gain ground on traditional slotted delivery services, potentially reaching a 70% share of India’s online grocery market within the next 2-3 years. This optimistic projection is based on the sector’s ability to strike a balance between competitive pricing and swift delivery times.