Goldman Sachs said in a report late Thursday that Blinkit, the quick-commerce arm of Indian food delivery giant Zomato, is now more valuable than its core food delivery business, according to the bank’s overall analysis.
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 worth 98 rupees per share. Goldman had already set Blinkit’s valuation at $2 billion in March 2023.
Blinkit’s valuation increase is due to its strong growth potential in the fast-growing Indian fast trading market. Goldman Sachs forecasts that Blinkit’s gross order value (GOV) will grow at a compound annual growth rate (CAGR) of 53% between fiscal years 2024 and 2027, exceeding the overall online grocery market’s forecast CAGR of 38% over the same period.
Zomato acquired Blinkit in 2022 for less than $600 million.
The investment bank believes India’s quick commerce market is poised for growth due to several factors, including a large unorganized food sector, high population density in urban areas and a favorable delivery cost to average order value ratio. This dynamic has enabled Blinkit to offer competitive pricing and fast delivery times, increasing customer adoption.
Fast trading that boomed worldwide during the pandemic has since cooled in many markets. However, India continues to buck this trend. Unique factors such as a large, unorganized retail sector and favorable demographics, coupled with an attractive unit economy, set India apart, according to many analysts.
India is poised to move from unorganized retail directly to fast-track retail, potentially 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 emulate the characteristics of traditional kiranas (neighborhood stores), such as: B. servicing small, frequent purchases and offering a large selection of items. With Indian kitchens requiring regular restocking and limited storage space, Quick Commerce’s proximity and expanding product range make it an attractive alternative to kiranas and modern retail.
Goldman Sachs estimates India’s addressable quick commerce market to be $150 billion in 2023 in the top 50 cities alone. 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 of them becoming profitable players by fiscal 2030.
The report suggests that Blinkit is expected to reach EBITDA breakeven by June quarter 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 an impact on Zepto and Swiggy, which are planning to make their stock market debuts this year.
Swiggy, operator of instant commerce platform Instamart, announced this week that it has received approval from its shareholders for an initial public offering in which the company aims to raise about $1.25 billion. Swiggy was valued at $10.7 billion in its latest 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 quick commerce market. The Mumbai-headquartered startup was recently on track to hit $1.2 billion in annual revenue.