Challenges in 10 minutes delivery promise Results Blinkit to merge with Zomato

Blinkit (formerly Grofers) is an Indian instant delivery service. It was founded in December 2013 and is based out of Gurgaon. Customers of the company use a mobile application to order groceries and essentials online. As per the source, Blinkit raised the capital in debt from Zomato, and could raise an additional $300 million from the food-tech company this year. Zomato had previously invested $100 million in the company for a 10% stake in August last year following which it had rebranded itself from Grofers to Blinkit with a specific focus on 10-minute deliveries.

Blinkit pioneered 10-minute grocery delivery in India post its $100 million investment in August 2021. Since then, the platform has scaled rapidly to $450 million annual run rate GMV (January 2022 annualised) and now operates with 400+ dark stores across 20 cities in India. 100 percent of Blinkit's business now is in quick commerce format with a median delivery time of less than 12 minutes. As of now, there does not seem to be a sustainable business model for quick commerce companies.

Until they start charging users a delivery fee or introduce some kind of a membership subscription plan, it is unlikely that they will manage to improve finances from operations. That could be a potential reason behind why investors are hesitant to pump in additional capital into the company right now,” a top venture capital executive said, requesting anonymity.

Blinkit is set to merge with online food aggregator and delivery platform Zomato that will result in the quick commerce company losing its unicorn tag in less than a year and may dampen investor euphoria around the concept of 10-minute delivery service model.

The transaction involves an all-stock deal that values Blinkit between $700 million and $800 million. Zomato connects over 55 million users to restaurants in 24 countries. It is backed by investors Tiger Global, Temasek and other capsule investors. SoftBank Vision Fund holds almost 45% in Grofers as its largest shareholder, while Tiger Global and Sequoia Capital are common investors in Zomato and the grocery e-tailer. Tiger Global and SoftBank are now the two largest investors when it comes to dollars invested in startups for 2021. But the approach to how the two deploy capital is incredibly different.

The equation is Zomato’s biggest competitor Swiggy has its own grocery delivery services in the shape of Instamart, which is available as an integrated service on its native app. In addition to this, several other companies have entered the q-commerce segment, including Mumbai-based Zepto, Tata Group’s Bigbasket, ride-hailing company Ola, and Reliance Industries-backed Dunzo.

S Mohini Ratna, Editor, VARINDIA