Zomato Share: Shares of Zomato were trading higher in the morning session and went up to 3 per cent after it announced that its board has approved the acquisition of Blink Commerce Pvt Ltd (earlier known as Grofers) , where it already holds 8-9 per cent stake. 4,447 crore in a share swap deal as part of its strategy to invest in the accelerated commerce business.
As part of the deal, Zomato will issue 62.9 million shares at an allocation price of Rs 70.76 per share, which is an equity stake of 6.88 per cent, on a fully diluted basis.
On June 24, after market hours, Zomato informed the exchanges that its board has approved the acquisition of 33,018 equity shares of quick commerce company Blink Commerce (BCPL) (formerly known as Grofers India) for ₹4,447.48 crore. has given its approval in Rs. All stock deals. The company also said that it has amended the definitive agreement dated June 28, 2021 with Grofers International Pte. Ltd., Hands-on Trades Private Limited (HOTPL) and Albinder Singh Dhindsa, hereby modify certain rights of the Company in respect of their existing investment in HOTPL (Contract). The Agreement will be effective after the completion of the acquisition of BCPL by the Company.
What do analysts say?
“Blinkit increases Zomato’s TAM and makes the business more defensive. Both the apps will remain separate and Zomato will explore ways to leverage its existing customer base. Peak delivery times for food delivery are also complemented by accelerated commerce, – this should help improve delivery fleet utilization,” Jefferies said in a note.
The global brokerage has given a ‘Buy’ rating on the shares of Zomato with a target price of Rs 100. “Quick Commerce, growing rapidly, is in the early stages and the business model is yet to be proven – Blinkit has been in this position for only 5 months so far. Unlike Food Tech, the market is crowded and rates low But the management sees better profitability in the medium term.
JM Financials said in its note: “We believe that the Quick Commerce space can, in the long run, offer a large complimentary profit pool to players such as Zomato, which has built up significant expertise in on-demand services over the years. Blinkit’s deal EV is 5MCY22 annual GMV on 1.5x basis (JMFe of 475mn USD), indicating a 19 per cent discount on Zomato’s current valuation multiplier of 1.85x basis 1QCY22 annual GMV, which is what our valuation suggested 25 per cent discount. The outline for the Quick Commerce players in our previous report. Considering the intense competitive intensity in the Quick Commerce space, we believe that the path to profitability for the Zomato Group (post-acquisition) is at least May be extended by one year (FY 25 to FY 26). Despite management optimism, we forecast conservatively for Blinkit due to limited data and base DCF, ensuring that the acquisition is our best buy for Zomato. Published TP of Rs.115 has >8 percent value added It can.
Edelweiss, another brokerage, has maintained its positive outlook on the core business, considering the long growth runway and path to profitability. It has maintained a ‘Buy’ rating with a DCF-based target price of ₹80.
“The Blinkit acquisition is crucial for Zomato to achieve synergy on delivery costs. Zomato’s management has set an upper limit of $400 million for accelerated commercial investment for the next two years (CY22, CY23E). Any deviation from this would be a significant risk to our hypothesis. We expect Zomato to be able to create 5-10 per cent synergy on delivery cost,” Edelweiss said in a note.
While management’s ‘educated guess’ is that Blinkit will break even at adjusted EBITDA levels over the next three years, analysts at Edelweiss are skeptical.
The views and investment suggestions of experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decision.
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