Zomato Invests Heavily in Blinkit’s Future

by | Jan 18, 2025 | Business

Zomato, the Gurugram-based food delivery giant, has infused an additional ₹500 crore into its quick-commerce subsidiary, Blinkit, bringing its total investment to ₹2,800 crore since acquiring the company in 2022.

This latest investment follows Zomato’s ₹8,500 crore capital raise through a qualified institutional placement in November 2024, aimed at strengthening its balance sheet amidst intensifying competition in India’s quick-commerce sector.

Zomato acquired Blinkit (formerly Grofers) in June 2022 for $568 million in an all-stock deal. The acquisition was part of Zomato’s strategy to expand into the quick commerce market.

Blinkit faces stiff competition from key players like Swiggy Instamart, Zepto, Flipkart, and Amazon. To maintain its market leadership, Blinkit is undertaking a significant expansion drive, aiming to operate 1,000 dark stores by March 2025 and 2,000 by December 2026. The company has also recently launched Bistro, a 10-minute food delivery service, to compete with offerings from Swiggy and Zepto.

Zomato considered integrating Blinkit into its app, but eventually decided to keep the two platforms separate.

In the first quarter of the fiscal year 2024-2025, Zomato reported a consolidated net profit of ₹2.53 billion, surpassing analysts’ expectations. This growth was driven by high demand for its quick-commerce service Blinkit and food delivery services. Blinkit’s gross order value surged by 130%, contributing significantly to Zomato’s revenue increase of 74% to ₹42.06 billion.

However, in the second quarter, Zomato’s net profit rose nearly five-fold to ₹1.76 billion but fell short of analysts’ estimates. The company added 152 new dark stores for Blinkit, bringing the total to 791 distribution centers. These expansions impacted margins, with the contribution margin falling to 3.8% from the previous quarter’s 4%. CFO Akshant Goyal acknowledged that margins are temporarily affected due to the time new stores and warehouses take to ramp up.

Why did Zomato acquire Blinkit?

Market expansion: Zomato wanted to reach new customers and increase user engagement.
Operational synergies: Zomato could use Blinkit’s logistics network and expertise in fast delivery to improve its own food delivery infrastructure.
Competitive edge: It could compete more effectively with other players in the quick commerce and e-grocery markets.

Zomato’s continued investment in Blinkit underscores its commitment to strengthening its position in India’s competitive quick-commerce market. The company’s strategic expansions and service innovations aim to drive growth and profitability in the evolving landscape.

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