Goldman Sachs said in a report late Thursday that Indian food giant Zomato’s fast-commerce arm is now more valuable than its core food delivery business, according to the bank’s sum-of-the-parts analysis.
The investment bank values Blinkit at 119 Indian rupees ($1.43) per share, or about $13 billion, while Zomato’s food delivery business is valued at Rs 98 per share. Goldman previously pegged Blinkit’s valuation at $2 billion in March 2023.
Blinkit’s rise in valuation is driven by its strong growth potential in India’s fast-growing e-commerce market. Goldman Sachs predicts Blinkit’s gross order value (GOV) to grow at a compound annual growth rate (CAGR) of 53% between fiscal years 2024 and 2027, outpacing the overall online grocery market’s projected CAGR of 38% over the same period .
Zomato acquired Blinkit for less than $600 million in 2022.
The investment bank believes that India’s fast-casual 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 of delivery costs to average order prices. This dynamic has allowed Blinkit to offer competitive pricing and fast delivery times, driving customer adoption.
The brisk trade, which boomed globally during the pandemic, has since cooled in many markets. India, however, continues to buck this trend. Unique factors such as a large unorganized retail sector and favorable demographics, coupled with attractive unit economics, set India apart, according to many analysts.
India is poised to make the jump from unorganized retail directly to brisk trade, possibly bypassing the modern retail phase seen in other countries, HSBC analysts wrote in a note this month. Quick Commerce’s success lies in its ability to mimic the characteristics of traditional kiranas (neighborhood stores), such as catering to small, frequent purchases and offering a wide range of SKUs. With Indian kitchens requiring regular refreshes and limited storage space, the proximity and expanding product range of fast food makes it an attractive alternative to both kiranas and modern retail.
Goldman Sachs estimates that India’s affordable e-commerce market in the top 50 cities alone is worth $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 to host up to five profitable players by the 2030 financial year.
The report suggests that Blinkit is expected to achieve EBITDA break-even by the June 2024 quarter and generate a higher EBITDA margin than Zomato’s food delivery business by FY 2030.
Blinkit’s rise in valuation will likely have implications for Zepto and Swiggy, which plans to make its public debut this year.
Swiggy, which runs direct commerce platform Instamart, revealed this week that it had received approval from its shareholders for an initial public offering, where it expects to raise about $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 piece of the Indian e-commerce market. The Mumbai-based startup was recently on pace to hit $1.2 billion in annual sales.
