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Goldman Sachs said in a report late Thursday that the Blinkit e-commerce unit of Indian food delivery giant Zomato is now more valuable than its core food delivery business, according to the bank’s general analysis.
The investment bank estimates Blinkit’s implied value at 119 Indian rupees ($1.43) per share, or about $13 billion, while Zomato’s food delivery business is valued at 98 rupees per share. Goldman previously pegged Blinkit’s valuation at $2 billion in March 2023.
Blinkit’s valuation increase is due to 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 fiscal 2024 and 2027, outpacing the overall online grocery market’s forecast CAGR of 38% in same period.
Zomato acquired Blinkit for less than $600 million in 2022.
The investment bank believes the Indian 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 values. This dynamic has allowed Blinkit to offer competitive pricing and fast delivery times, driving customer adoption.
Blinkit’s implied value per share is now greater than GS’s SOTP Food Delivery (Goldman Sachs)
The brisk trading that flourished globally during the pandemic has since cooled in many markets. However, India continues to buck this trend. According to many analysts, unique factors such as a large unorganized retail sector and favorable demographics coupled with an attractive unit economy set India apart.
India is poised to jump from unorganized retail directly to brisk trade, potentially bypassing the modern retail phase seen in other countries, analysts at HSBC wrote in a note this month. Quick commerce’s success 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. As Indian kitchens require regular replenishment and limited storage space, the proximity of fast-paced commerce and an expanding product range make it an attractive alternative to both kirana and modern retail.
Goldman Sachs estimates that India’s addressable 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 accommodate up to five winning players by the 2030 fiscal year
The report suggests that Blinkit is expected to reach EBITDA by the June quarter of 2024 and generate a higher EBITDA margin than Zomato’s food delivery business by fiscal 2030.
The rise in Blinkit’s valuation is likely to have implications for Zepto and Swiggy, which plan to make their public debuts this year.
Swiggy, which runs instant trading platform Instamart, revealed this week that it has received approval from its shareholders for an IPO where it expects to raise about $1.25 billion. Swiggy was valued at $10.7 billion in the latest round of private funding in early 2022.
Zepto, backed by StepStone Group and Y Combinator Continuity, is also competing fiercely with the two firms for a slice of India’s e-commerce market. The Mumbai-headquartered startup was recently on the cusp of hitting $1.2 billion in annual sales.
