Goldman Sachs analysts recently highlighted the remarkable transformation of Blinkit, the quick commerce startup acquired by Zomato in 2022, in their note published on April 25. Once considered a liability, Blinkit now stands as Zomato’s most valuable division, outstripping even its core food delivery business.
In 2022, Zomato’s acquisition of Blinkit, formerly known as Grofers, initially caused concern among investors, resulting in a 20 percent drop in Zomato’s shares. However, Zomato remained optimistic, and recent developments suggest that their faith was well-placed.
Initially purchased for $568 million, Blinkit’s implied valuation has skyrocketed to an astonishing $13 billion, marking a remarkable growth of over 6 times year-on-year, according to Goldman Sachs analysts. This valuation surpasses Zomato’s food delivery business for the first time, standing at Rs 119 per share compared to Rs 98.
Goldman Sachs utilized the sum of the parts (SOTP) method to assess Blinkit’s valuation, a technique that evaluates the worth of each business segment separately before totaling them. Currently, Blinkit constitutes the largest segment of Zomato, contributing $13 billion to the company’s total market capitalization, which stands at approximately $20 billion. The remaining value is attributed to Zomato’s other divisions, including food delivery, Hyperpure, and Dining Out.
The upward trajectory of Blinkit’s valuation is attributed to its improved performance, particularly evidenced by its higher gross order value (GOV), tracking approximately 50 percent higher than estimates from a year ago. Goldman Sachs also revised their previous estimate of Blinkit’s valuation from $8 billion to $13 billion, highlighting the platform’s robust growth potential.
Goldman Sachs predicts a promising future for quick commerce platforms, indicating a potential expansion to 40-50 cities from the current operational scope of less than 30 cities. These cities represent a substantial total addressable market (TAM) of approximately $150 billion in grocery and non-grocery sectors by CY23t. The online grocery industry, estimated at around $11 billion as of FY24, presents a significant opportunity for quick commerce companies, constituting approximately 50 percent of the market.
The note concludes with optimism about the quick commerce segment’s ability to capture a substantial share of India’s online grocery market, projecting a potential reach of around 70 percent within 2-3 years. This growth is expected to be driven by a favorable balance between pricing and delivery times, signaling a promising outlook for Blinkit and similar platforms in the evolving landscape of Indian e-commerce.
