Tue, 28 Jun 2022 05:37 PM IST
Food delivery app Zomato suffered a loss of nearly USD 1 billion as the shares of the company tanked by nearly 8.2 per cent on Tuesday amid concerns over the company's proposed acquisition of Blink Commerce Pvt Ltd (formerly known as Grofers) for Rs 4,447.48 crore. This is the second consecutive day when the restaurant aggregator suffered losses in the share market.
The food delivery app on Friday announced the acquisition of Blinkit for Rs 4,447 crores ($568.16 million) in stock in order to take hold of the competitive quick delivery market. The deal comes after it bought a more than 9 per cent stake in SoftBank Group-backed Blinkit for nearly Rs 518 crore in August, with a promise to invest as much as USD 400 million in the Indian quick-commerce market over the next two years.
The shares of the company fell nearly 14 per cent ever since the announcement was made, leading to a loss of almost 76.78 billion Rupees in market capitalization. They are also down nearly 48 per cent since going public last July. According to a Morgan Stanely client note, the total outstanding shares of the company will decrease by about 7.25 per cent after Zomato will issue its new shares to Blinkit.
The e-commerce sector is growing with rapid speed with rivals Swiggy, Reliance Industries-backed Dunzo, Tata-backed BigBasket, and Zepto making big investments. The industry was worth USD 300 million last year and is expected to see a growth of 10-15 times to USD 5 billion by 2025, according to research firm RedSeer.
"E-grocery economics have been tough to crack given price competition, relatively lower-margin nature of the category, high number of products per order which need efficient fulfillment, and very high competition," Kotak analysts said, as quoted by Reuters.
A report by ANI also suggests that the shares of Zomato have seen a fall of 53 per cent in 2022, on a cumulative basis. Punit Patni, Equity Research Analyst of Swastika Investment on the decline of Zomato shares, said that the recent acquisition by Zomato will add to the company's operating losses.
"Blinkit is synergistic to Zomato's food delivery business and the management expects the business to grow significantly in the future. The quick commerce market, however, has become incredibly competitive, and it will take a very long time to figure out the unit economics and turn profitable", he said as quoted by ANI.
(With Agencies Inputs)