Zomato's stock is up 2% as a result of a possible merger with Blinkit.

  • March 16, 2022, 12:24 p.m.

Shares of Zomato jumped more than 2 percent on March 16 after Moneycontrol reported that the company had entered into an agreement to merge with online grocery portal Blinkit in an all-stock deal.

In an exchange filing, Zomato said that it will extend a loan of $150 million to Blinkit to support its capital requirements.

Blinkit has come under immense pressure, given the hyper-competition in the quick service grocery format due to Zepto and Swiggy’s Instamart. The company has reportedly laid off employees, shuttered dark stores, and delayed some vendor payments.

Brokerage firm HSBC Securities India said the potential merger of Blinkit with Zomato will provide the online grocer access to the food delivery aggregator’s customers while enabling Zomato to enter the online grocery market, which has a larger total addressable market.

That said, brokerage firm BofA Securities said that the deal could be a negative for Zomato in the near-term.

BofA Securities believes Zomato’s capital infusion in Blinkit would lead to higher losses for the food aggregator, raise the risk of a cash call and is at odds with Zomato’s earlier commitment to focus on one core activity for the next few years.

Shares of Zomato collapsed in 2022 on the back of rising investor ire against richly priced but loss-making technology companies across the world amid prospects of higher interest rates.

At 9:29 am, shares of Zomato were up 0.5 percent at Rs 76.90 on the National Stock Exchange.

 

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

Related News