Online food delivery firm Zomato and online grocer Blinkit has signed up for a merger in an all stock deal which is likely to be at a down round for a valuation of $700 million, sources privy to the development told Moneycontrol.
Blinkit last raised $100 million from Zomato in a round which gave the company a unicorn status.
The deal signals towards the beginning of a consolidation in the quick commerce space in India.
The public listed food-tech firm will be approaching the Competition Commission of India for an approval soon.
Following the stock swap, Blinkit's lead investor Softbank will get around 4 percent stake in Zomato. It must be noted that Softbank already is an investor in rival Swiggy.
This comes days after Moneycontrol reported that Zomato is extending a $75-$100 million loan to rescue cash-strapped Blinkit.
The development happens at a time when Blinkit has laid off employees, shuttered dark stores, and delayed some vendor payments, amid intense competition in the quick commerce space.
Zomato's last investment in Blinkit happened for a 10 percent stake at a valuation of a billion dollar 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.
Blinkit laid staff from 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.
This was an attempt to cut costs by Blinkit which spent Rs 600 crore between November and February to expand business and acquire customers in the cash-guzzling and deep-discounted grocery delivery space.
It currently has close to 445 dark stores after shutting down approximately 40 of them in the last couple of months.
In February, Zomato said it had set aside $400 million to invest in quick commerce stating that this category offers a "huge addressable market" and is synergistic with its food delivery business.
Before that it made an investment of $225 million across Shiprocket, Magicpin and Blinkit.
Blinkit and Zomato didn't immediately respond to Moneycontrol's queries.
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