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Dolat Capital Report
Zomato Ltd. d Blinkit at enterprise /revenue multiple of ~8 times on May 2022 run rate basis for a business that was struggling to fund its operations and at a time when investor money is only looking for profitable option. Although the rationale for purchase is explained well, the ‘convenience fees’ for ‘Make versus Buy’ decision for quick-commerce business is too generous in favor of private equity/venture capital investors.
The transaction would have three-fold impact on the earnings of Zomato:
increased operating losses to fund Blinkit operations, currently at about Rs 13 billion plus at Ebitda levels,
impact on other income, as investments in capex (~0.75% of gross order ) for Blinkit operations would increase and
over 7.4% dilution in equity.
As a result our estimates have witnessed increased losses for the combined entity by 95%/133% for FY23/FY24E and believe that the path to profitability would shift back by another year now to FY28E.
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