Zomato to acquire Blinkit for Rs 4447 cr in all share deal, as cash is out of sight and Zomato has gone out of mind – A classic case of one loss-making company acquiring another.
Deals are done to enhance #profitability but this deal is enhancing Zomato’s losses with one year extension of its path to profitability.
Zomato already has the history of being one of the biggest wealth destroyers of 2022 as it has fallen 56% so far.
And with this deal, Zomato has further incurred $1 bn of valuation loss.
Even Blinkit is getting bruised with the deal as it values them at $570 mn, almost 2x lower than it’s #valuation of $1.1 bn in Aug’21!!
Market is relating the coming together of this deal with the togetherness that Zomato’s co-founder, Akriti Chopra and Blinkit’s founder Albinder Dhindsa share as wife and husband.
Moving beyond, looking at the numbers, this #buyout seems to destroy shareholder wealth with these red flags:
1) In their press release, Blinkit disclosed their revenues of only Jan’22 & May’22. What about the other months?
2) Their adjusted EBIDTA is not calculated basis the actual revenues. They have considered the gross order value which takes into account even the canceled orders (which clearly is not a true metric for showing #revenues)
3) Blinkit’s financials are unaudited plus their gross order value is calculated basis only the MRP without including the discount amounts.
However there are a few sweet spots in the deal:
A) Blinkit’s average order value is Rs 509, 28% higher than Zomato.
B) Blinkit operates in just 15 cities as opposed to Zomato’s 1000 cities, yet had 79 lakh orders in May’22 (16% of Zomato’s Q4FY22 run-rate)
Clearly looks like Zomato has just in a blink made this decision but do you think that this deal will be a near-term pain but long-term gain?