Goldman Sachs said in a report late Thursday that Blinkit, the fast commerce arm of Indian food delivery giant Zomato, is now more valuable than its core food delivery business, according to the company’s sum-of-the-parts analysis. bank.
The investment bank estimates Blinkit’s implied value at 119 Indian rupees per share ($1.43) or about $13 billion, while Zomato’s food delivery business is valued at 98 rupees per share. Goldman had previously set Blinkit’s valuation at $2 billion in March 2023.
Blinkit’s valuation increase is driven by its strong growth potential in India’s fast-growing e-commerce market. Goldman Sachs forecasts that Blinkit’s gross order value (GOV) will grow at a compound annual growth rate (CAGR) of 53% between financial years 2024 and 2027, surpassing the projected CAGR of 38% for the overall grocery market online during the same period.
Zomato acquired Blinkit for less than $600 million in 2022.
The investment bank believes that India’s fast commerce market is poised for growth due to several factors, including a large unorganized grocery sector, high population density in urban areas and a favorable ratio between delivery costs and the average order values. This dynamic has allowed Blinkit to offer competitive pricing and fast delivery times, driving customer adoption.
Fast trading, which boomed globally during the pandemic, has since cooled in many markets. India, however, continues to buck this trend. According to many analysts, unique factors like a large unorganized retail sector and favorable demographics, along with attractive unit economics, are setting India apart from the rest.
India is on the verge of moving directly from unorganized retail to fast-track trading, potentially avoiding the modern retail phase seen in other countries, HSBC analysts wrote in a note this month. The success of fast commerce lies in its ability to mimic the attributes of traditional kiranas (neighborhood stores), such as catering to small, frequent purchases and offering a wide range of SKUs. With Indian kitchens requiring regular refills and limited storage space, the proximity of fast-trade and growing range of products make it an attractive alternative to both kiranas and modern retail.
Goldman Sachs estimates that India’s accessible fast commerce market in the top 50 cities alone will amount to $150 billion by 2023. Despite the presence of well-capitalized competitors such as Swiggy and Zepto, the bank believes the market is large enough to host up to five profitable players by fiscal year 2030.
The report suggests that Blinkit is expected to break-even EBITDA by the June 2024 quarter and generate a higher EBITDA margin than Zomato’s food delivery business by fiscal 2030.
The rise in Blinkit’s valuation will likely have implications for Zepto and Swiggy, which plans to make their public debut this year.
Swiggy, which operates instant commerce platform Instamart, revealed this week that it had received approval from its shareholders for an IPO, where it hopes to raise around $1.25 billion. Swiggy was valued at $10.7 billion in its most recent private funding round in early 2022.
Zepto, backed by StepStone Group and Y Combinator Continuity, is also competing fiercely with the two companies for a share of the Indian fast commerce market. The Mumbai-based startup was recently on track to achieve $1.2 billion in annual sales.
