Zomato Shares Fall Over 20 Percent After Blinkit Acquisition Announcement

Food aggregator Zomato announcement of the acquisition of instant delivery service platform Blinkit has not gone down well with the investors as the former's shares tumbled over 20 percent since the announcement.

The food aggregator company Zomato's Board of Directors on June 24 approved a proposal to acquire the cash-strapped quick commerce company Blinkit for Rs 4,447 crore. Blinkit was earlier known as Grofers.

Zomato said quick commerce increases the company's potential market, the potential profit pool and also makes the business more defensible.

Besides, the peak demand times for food delivery are also complementary to the quick commerce demand peaks in non-meal times. It believes the acquisition will help increase Zomato's hyperlocal delivery fleet utilisation and reduce the cost of delivery.

"In today's funding winter, people have increased their scrutiny on profitability, Zomato net losses tripled in the recent quarter. Investors are not taking it kindly the fact that a loss-making company is acquiring another company which might be subjected to strict govt regulations and has not yet demonstrated path to profitability," Yashvardhan Singh, principal associate at Sarvaank Associates, had said.

On Friday, the shares of Zomato closed at Rs 54.9, down around 23 percent since the announcement of the Blinkit acquisition.

So far in 2022, it declined over 60 percent, data showed.

Even though the company reported healthy gains on its listings on the stock exchanges in July last year, it could not capitalize on it further.

The company's current market capitalisation is worth Rs 43,147 crore, National Stock Exchange data showed.