 "blinkit")
The implied value of Zomato-owned quick commerce firm Blinkit is now larger than that of its core food delivery business, according to analysts at Goldman Sachs.
“Blinkit’s implied valuation in our Zomato’s sum of the parts (SOTP) is $13 billion now, versus $2 billion in March 2023, with per share implied value of Rs 119 higher than food delivery, at Rs 98, for the first time,” the analysts said in a note on Thursday night.
At present, Zomato has a market capitalisation of about $20 billion, or Rs 1.63 trillion.
Deepinder Goyal, the founder and CEO of Zomato, has been hinting for the past few quarters that its quick commerce business is set to surpass the food delivery business.
Zomato’s food delivery earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin is already the highest among global food delivery platforms, and a similar construct is expected to play out in quick commerce, the Goldman Sachs note said.
The investment bank, which forecasts Blinkit’s gross order value (GOV) to grow at a compound annual growth rate (CAGR) of 53 per cent during FY2024-27, stated that the quick commerce platform’s GOV growth as well as margin improvement had been consistently tracking higher than expectations.
More From This Section
“We now expect Blinkit’s GOV and Ebitda to be higher than that for food delivery by FY29,” it said.
Blinkit, formerly Grofers, was acquired by Zomato in 2022 in a distress sale via an all-stock deal for $568 million. Before the acquisition, the company was reportedly valued at around $800 million. Blinkit's valuation then had come down from $1 billion.
Once a cash-guzzling business, Blinkit has since made significant strides in improving its financial health. Its latest valuation of $13 billion is the highest among existing players in the segment.
For instance, Zepto was valued at $1.4 billion after its fundraise of $200 million in 2023. The firm, which is in talks to raise $300 million, according to sources, will be valued at $2.5-3 billion. The valuations of Swiggy's Instamart could not be ascertained.
According to Goldman Sachs, the Indian quick commerce market is poised for growth due to factors such as a large unorganised grocery sector, high population density in urban areas, and a favourable ratio of delivery costs to average order values.
Quick commerce platforms in India operate in less than 30 cities at present, with plans to expand to 40-50 cities over time.
“Per our analysis, these cities represent about $150 billion in grocery and non-grocery TAM (total addressable market) for quick commerce platforms as of CY23,” the note read.
Blinkit’s growth outpaced that of Zomato’s core food delivery business in the third quarter (Q3) of financial year 2023-24 (FY24). Its GOV grew 103 per cent year-on-year (YoY) in Q3, compared to 27 per cent GOV growth in food delivery.
The company has admittedly been witnessing strong growth in both ad revenue and profitable expansion of its dark stores. Higher average selling price (ASP) categories, like iPhones and PS5s, have also allowed Blinkit to steadily improve its average order value (AOV) per transaction, which, in turn, improves the margin of each order.
Blinkit’s AOV in Q3 stood at Rs 635, as against Rs 607 in the previous quarter. Its GOV also increased 28 per cent sequentially, driven by the increase in AOV, according to regulatory filings.
The total number of orders in the December quarter climbed to 55.8 million, from 45.5 million in the previous quarter, while monthly transacting users increased quarter-on-quarter (QoQ) to 5.4 million from 4.7 million.
