Zomato’s board of directors will meet on June 24 to likely approve the acquisition of e-grocery startup Blinkit (formerly Grofers). While Zomato, in a regulatory filing on Wednesday, did not say whether the upcoming board meeting was related to the Blinkit deal, it only said it is to discuss a potential acquisition.
“Pursuant to Regulation 29 of the listing regulations, as amended, this is to inform you that a Zomato board of directors meeting is scheduled for Friday, June 24, 2022, to discuss a potential takeover transaction by Zomato. business. whose consideration can be discharged through an issuance of capital shares of the company through a preferential issue,” the stock exchange filing said.
This means that the deal with Blinkit will not involve any cash outlay by Zomato, but will instead be a stock swap deal. The swap is likely to be in a 1:10 ratio where Zomato would get 10 shares of Blinkit for every one of its shares.
At the initial level of talks between the two firms, Blinkit’s valuation was seen at $700-750 million, but that is likely to drop now.
Blinkit has been struggling to raise funds, leading it to lay off employees and close its warehouses to conserve cash.
In March, Zomato had announced a $150 million investment in Blinkit in the form of debt to help it service its debts to suppliers and other creditors. Zomato said then that the loan to Blinkit will be disbursed in multiple tranches at an annual interest rate of 12%.
Prior to that, Zomato had invested around $100 million in Blinkit in August 2021. At the time, Zomato had said that it had plans to invest a total of $400 million in Blinkit, part of which would be structured as convertible notes. Zomato had at the time hinted at a possible merger in the coming days.
With the pandemic driving more and more people to shop for groceries online, analysts feel the trend is here to stay and tier two cities and beyond will be the next growth frontier for players in the segment. Zomato has been actively looking into the e-grocery space as he feels there is a huge opportunity here. Last year, executives at the firm said the strategy behind the company’s investment in Blinkit was to gain more exposure to the space and build a strategy around the e-grocery business.
On Wednesday, shares of Zomato closed up 2.12% at Rs 67.55 on the BSE.