Blinkit Surpasses Zomato's Food Delivery Business In Value, Says Goldman Sachs

Zomato, with a current market capitalisation of approximately $20 billion, sees Blinkit as its leading segment, representing $13 billion of the total market capitalisation

The estimated value of Blinkit, the quick-commerce startup acquired by Zomato in a fire sale in 2022, now exceeds that of Zomato's core food delivery business, states the analysts at Goldman Sachs in a note published on Thursday. From once burdening Zomato to now emerging as its flagship division, Blinkit's fortunes have taken a dramatic turn. In 2022, when Zomato disclosed its acquisition of Blinkit (formerly Grofers), investors perceived it as a bailout, resulting in a 20 per cent drop in Zomato's shares. 

Nevertheless, the company maintained optimism, and it seems to have successfully fulfilled its commitments. Zomato's acquisition of Blinkit for $568 million in 2022 has seen a remarkable transformation. Bolstered by enhanced performance, Blinkit's estimated worth has surged to an impressive $13 billion, as indicated by analysts at Goldman Sachs. This represents a staggering sixfold increase in valuation on a year-on-year (YoY) basis.

“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,” states the note.

The SOTP valuation method involves evaluating a company's worth by analyzing the value of its individual business segments or subsidiaries independently, and subsequently aggregating these values to determine the total company valuation.

Zomato, with a current market capitalisation of approximately $20 billion, sees Blinkit as its leading segment, representing $13 billion of the total market capitalisation. The company's other divisions, including Food Delivery, Hyperpure, and Dining Out, contribute to the remaining market capitalisation.

Goldman Sachs revised Blinkit's valuation upward to $13 billion from their previous estimate of $8 billion, as stated in an April 4 report. This adjustment reflects increased gross order value (GOV) projections for Blinkit, which are currently tracking approximately 50 per cent higher than estimates from a year ago, according to Goldman Sachs.

Currently, quick commerce platforms are operating in fewer than 30 cities, but there is room for expansion to 40-50 cities in the future. "According to our analysis, these cities account for approximately $150 billion in total addressable market (TAM) for quick commerce platforms as of CY23," noted Goldman Sachs.

Goldman Sachs also estimated that the online grocery industry is valued at around $11 billion as of FY24, with quick commerce companies capturing roughly 50 percent of the market, representing a gross order value (GOV) opportunity of $5 billion.

“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 added.