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Exclusive: Zomato may extend $75-100 million debt to rescue cash-strapped Blinkit

Blinkit has laid off employees, shuttered dark stores amid rising competition. It recently raised $10 million debt from Innoven Capital.

March 10, 2022 / 04:54 PM IST
Albinder Dhindsa, CEO and Founder, Blinkit (previously Grofers).

Albinder Dhindsa, CEO and Founder, Blinkit (previously Grofers).


Food delivery platform Zomato may extend a $75-$100 million loan to rescue cash-strapped quick commerce startup Blinkit, persons familiar with the development said. The lifeline comes at a time when the startup has laid off employees, shuttered dark stores, and delayed some vendor payments, amid intense competition in the quick commerce space.  

 

Zomato last invested $100 million in Blinkit (previously Grofers) for a 10 percent stake at a valuation of a billion dollars just before its initial public offering in July last year. While Blinkit was supposed to raise a further $500 million from Zomato, this hasn't materialised due to current market conditions, where new-age tech stocks have been hammered. Sources say the $100 million debt will help Blinkit tide over liquidity issues, paving way for an eventual acquisition by Zomato.

 

"Zomato will have to get permission from CCI for a buyout and that might take months. Blinkit doesn't have such a long runway and needs cash to meet various commitments," one of the persons cited above said.


Blinkit has also been in talks with a bunch of venture debt firms to raise money and recently signed a term sheet with Innoven Capital for debt worth $10 million, according to people familiar with the matter. The money from Innoven is expected to come in three tranches with the company receiving a few crores last month. 


Most of the layoffs by Blinkit have happened in cities like Mumbai, Hyderabad and Kolkata across segments such as riders, pickers and store managers. The company currently has over 2,000 people on its payroll and 30,000 ground staff. This layoff is likely to have impacted close to 5 percent of the overall strength. 

Blinkit, which spent Rs 600 crore between November and February to expand the business and acquire customers in the cash-guzzling and deep-discounted grocery delivery space, is now looking to cut costs and has reduced its cash burn, these people said.


"They had signed up a lot of dark stores which they are not going to use. They have been checking with rival companies if anyone is interested in buying the infrastructure at depreciated rates," said one of the sources quoted above.

The company currently has close to 445 dark stores after shutting down approximately 40 of them in the last couple of months.

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Blinkit which was on its way towards a rapid expansion has also started witnessing a slowdown in order growth in recent months. According to sources, from 2.8 million orders in November, it reported a massive surge with over five million orders in January. However, the two consecutive months thereafter have witnessed just 4 percent month-on-month growth. As of now, the company is delivering around 190,000 orders every day.

The company also faced complaints on social media for promising lightning-fast grocery delivery and then for not being able to commit to its promises many times, in the last few months. Customers alleged that their orders were shown as delivered even though they didn't get any delivery in the stipulated time.


"They are not setting up any new facilities. Instead, the existing dark stores have been asked to utilise their full capacities," said another source confirming that a vendor who works with Grofers has also been facing delay in payments.

"Earlier the payment used to happen in 30 days of raising the invoice. Now that is being delayed to 45-50 days," said the person quoted above.

While the company did not respond to a detailed set of questions, it confirmed that its fundraise was happening and it was taking efforts to rationalise costs.

"Our business has grown 2.5x since November. Our fundraising is on track, and we continue to hire in key positions, while we also continue to remove costs that are now redundant due to a pivot in our business from a next-day grocery service to a 10-minute e-commerce business," a spokesperson said.
Everybody loves Qcommerce 


While the jury is still out on whether people actually need essentials in 10 minutes and if this is a sustainable business model, competition has heated up in this space. From new entrants such as Zepto to Swiggy's Instamart to Dunzo, everyone wants a slice of the action. SoftBank-backed Blinkit recently pulled the plug on areas that it cannot service within 10 minutes."We are singularly committed to instant delivery-focusing only on areas where we are serving under 10 minutes," Blinkit founder and CEO Albinder Dhindsa had said.

Swiggy, which also counts SoftBank as an investor, is investing $700 million in its express grocery delivery business Instamart, throwing down the gauntlet to rivals.

Apart from Blinkit, Swiggy, Zepto, Google-backed Dunzo, Walmart-owned Flipkart, Amazon, Tata-owned BigBasket, and Reliance-JioMart are all hankering after quick commerce, as more Indians shop for daily essentials online.

Zomato did not comment for the story.

Priyanka Sahay
Sanghamitra Kar
first published: Mar 10, 2022 04:10 pm
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