Goldman Sachs said in a report on Thursday that Indian food delivery giant Zomato’s fast commerce arm, Blinkit, is now more valuable than its core food delivery business, according to sum-of-the-parts analysis of the bank.
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 valued at 98 rupees per share. Goldman previously pegged Blinkit’s valuation at $2 billion in March 2023.
The rise in Blinkit’s valuation is due to its strong growth potential in the fast-growing Indian 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 years 2024 and 2027, exceeding the overall forecast CAGR of 38% for the entire Blinkit market. online grocery shopping during the same period.
Zomato acquired Blinkit for less than $600 million in 2022.
The investment bank believes that the Indian fast food market is poised for growth due to several factors, including a large unorganized food sector, high population density in urban areas and a favorable ratio of delivery costs to the average order value. This dynamic has enabled Blinkit to offer competitive pricing and fast delivery times, driving customer adoption.
Rapid trade, which boomed globally during the pandemic, has since slowed in many markets. India, however, continues to oppose 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 move directly from unorganized retail to fast-paced retail, potentially bypassing the modern retail phase seen in other countries, HSBC analysts wrote in a note this month. The success of fast retail 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. With Indian kitchens requiring regular refills and limited storage space, proximity to fast trade and expanding product range make it an attractive alternative to kiranas and modern retail.
Goldman Sachs estimates that India’s addressable fast commerce market in the 50 largest cities alone is worth $150 billion by 2023. Despite the presence of well-capitalized competitors such as Swiggy and Zepto, the bank estimates that the market is large enough to accommodate up to five people. profitable players by FY 2030.
The report suggests that Blinkit is expected to achieve breakeven EBITDA by the June 2024 quarter and generate a higher EBITDA margin than Zomato’s food delivery business by fiscal 2030.
Blinkit’s rising valuation will likely have implications for Zepto and Swiggy, which plan to make their public debuts this year.
Swiggy, which operates instant commerce platform Instamart, revealed this week that it had received shareholder approval for an IPO, where it hopes to raise around $1.25 billion. Swiggy was valued at $10.7 billion in its last private funding round in early 2022.
Zepto, backed by StepStone Group and Y Combinator Continuity, is also in fierce competition with both companies for a share of the Indian fast commerce market. The Mumbai-based startup was recently on track to achieve an annual revenue of $1.2 billion.
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