Zomato’s high-speed commerce unit Blinkit is outpacing its core food business in value, Goldman Sachs says

Goldman Sachs said in a report late Thursday that Indian food delivery giant Zomato’s fast-trading arm Blinkit is now more valuable than its core food delivery business, according to the bank’s sum-of-the-parts 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 valued at Rs 98 per share. Goldman previously estimated Blinkit’s valuation at $2 billion by March 2023.

Blinkit’s valuation increase is driven by the strong growth potential in India’s fast-growing high-speed 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, surpassing the online grocery market’s overall expected CAGR of 38% over the same period.

Zomato acquired Blinkit in 2022 for less than $600 million.

The investment bank believes that the Indian fast-trade 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 value. This dynamic has allowed Blinkit to offer competitive pricing and fast delivery times, driving customer adoption.

Fast-paced trading, which boomed globally during the pandemic, has since cooled in many markets. However, India continues to buck this trend. According to many analysts, India stands out due to unique factors such as a large, unorganized retail sector and favorable demographics, coupled with an attractive economic entity.

India is poised to make the leap from unorganized retail straight to high-speed trading, 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 mimic the features of traditional kiranas (convenience stores), such as catering for small, frequent purchases and offering a wide range of SKUs. With Indian kitchens requiring frequent restocking and limited storage space, its rapid turnover and growing product range make it an attractive alternative to both kiranas and modern retail.

Goldman Sachs estimates that India’s addressable high-speed trading market in the top 50 cities alone will reach $150 billion by 2023. Despite the presence of well-capitalized competitors like Swiggy and Zepto, the bank believes the market is large enough to accommodate up to five cities. profitable players by fiscal year 2030.

The report suggests that Blinkit is expected to achieve breakeven EBITDA in the June 2024 quarter and generate a higher EBITDA margin than Zomato’s food delivery business by fiscal 2030.

The rise in Blinkit’s valuation is likely to impact Zepto and Swiggy, which plan to make their public debuts this year.

Swiggy, which operates instant commerce platform Instamart, announced this week that it has received approval from its shareholders for an initial public offering, in which it is expected to raise about $1.25 billion. Swiggy was valued at $10.7 billion in its most recent 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 piece of the Indian fast trading market. The Mumbai-headquartered startup was recently on track to reach $1.2 billion in annual revenue.