Blinkit more valuable than Zomato food delivery business: Goldman Sachs

Albinder Dhindsa, CEO, Blinkit

The implied value of Blinkit, the troubled quick commerce startup that Zomato acquired in a fire sale in 2022, is now larger than that of Zomato’s core business (food delivery), analysts at Goldman Sachs said in a note published on April 25.

From being an albatross around Zomato’s neck to now becoming its largest division, things are looking up for Blinkit. Back in 2022, when Zomato announced its decision to acquire Blinkit (formerly Grofers), investors saw it as a rescue act and Zomato’s shares dropped 20 percent in response. The company, however, continued to be optimistic and it now appears to have delivered on its promises.

Zomato had acquired Blinkit for $568 million in 2022 but since then, on the back of improved performance, the latter’s implied valuation has grown to a staggering $13 billion, according to analysts at Goldman Sachs. And on a year-on-year (YoY) basis, the valuation has grown by over 6X.

“We note that Blinkit’s implied valuation in our Zomato’s sum of the parts (SOTP) is (close to) $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 note said.

SOTP is a method used to calculate the valuation of a company by assessing the value of each of its business segments (or subsidiaries) separately and then adding them up to get the total value of the firm.

For Zomato, which currently has a market capitalisation of around $20 billion, Blinkit is the largest segment and accounts for $13 billion of the total market capitalisation. Food delivery, Hyperpure and Dining Out are the company’s other divisions which are responsible for the remaining amount.

The $13 billion valuation for Blinkit is an upgrade from Goldman Sachs’ earlier estimate of $8 billion (as per an April 4 report). The upgrades were because of higher gross order value (GOV) estimates for Blinkit which is tracking around 50 percent higher than estimates from one year ago, Goldman Sachs said.

The note said the upward trend for GOV will continue supported by economics and industry structure for quick commerce which is improving based on new analysis of the potential total addressable market (TAM).

Quick commerce platforms are currently operational in less than 30 cities, but have the potential to expand to 40-50 cities over time. “Per our analysis, these cities represent about $150 billion in grocery and non-grocery TAM for quick commerce platforms as of CY23t,” Goldman Sachs said.

It estimated that the online grocery industry is around $11 billion as of FY24, and quick commerce companies make up for around 50 percent of the market, or a $5 billion opportunity in GOV.

“We believe the quick commerce segment can continue taking share from slotted delivery, and reach (around) 70 percent share of India’s online grocery in 2-3 years, a combination of good balance between pricing and delivery times,” the note concluded.