Goldman Sachs claims Blinkit is worth more than Zomato’s food delivery service
Goldman Sachs claims that Zomato’s rapid commerce division Blinkit has overtaken its food delivery division for the first time in terms of implied value. Blinkit contributes more to Zomato’s sum-of-the-parts valuation at Rs 119 per share, or around $13 billion in equity value, than the food delivery company at Rs 98 per share.
Analysts Manish Adukia, Harshita Wadher, and Anisha Narayan stated, “We believe the market is still under-appreciating Zomato’s growth and profit potential in the online grocery segment.” The company’s shares ended Friday’s trading session on the NSE at Rs 188.1 a share.
The company projects that between FY24 and FY27, Blinkit’s gross order value will increase at a compound annual growth rate (CAGR) of 53%, propelling Zomato’s overall adjusted revenue CAGR of 32%. In contrast, the company projects that the gross order value in its food delivery business will grow at a muted CAGR of 20% because of limited near-term visibility.
According to Goldman, a rapid commerce business model requires low rider cost to average order value (AOV) ratio, a vast, disorganized, and inefficient supply chain, and high population density metropolitan centers in order to be profitable and successful.
A basket of certain FMCG items costs between 10% and 15% less on Blinkit and other rapid commerce platforms than its maximum retail price, according to the brokerage’s study. This is because structured or online channels do not have middlemen, and manufacturers give them a price advantage because of their size.
In addition to having lower prices, fast commerce platforms in India provide a wider selection than unorganized retail. While rapid commerce systems contain 6,000–7,000 SKUs, including non-grocery categories, kirana outlets typically have 1,500–2,000 SKUs. Furthermore, the delivery time, at less than 20 minutes, is on par with or faster than the time it takes to buy the same basket at kirana stores—all without the added expense and effort of commuting.
Quick commerce systems, including BigBasket’s BBnow, are estimated by the brokerage to account for over half of the $11 billion online grocery market in FY24, or around $5 billion in gross order value. Blinkit probably has a 14% stake in this. “With a combination of good pricing and delivery times, we believe the quick commerce segment can continue taking share from slotted delivery and reach about 70% share of India’s online grocery in 2-3 years,” the analysts said.
The brokerage anticipates that Blinkit will reach adjusted EBITDA breakeven by the June quarter and achieve a 5.8% EBITDA margin by FY30—a figure that exceeds its initial projection of 5.3% for the food delivery industry. Higher take rates from improved gross margins, more revenue from advertisements, handling fees, and fixed cost operational leverage will be the main drivers of this.
