Prodded By SEBI, Zomato Issues Another Clarification On Blinkit Acquisition, Deal Value

Foodtech startup Zomato on Tuesday (August 2) issued another clarification on its acquisition of quick-commerce startup Blinkit on the directions of the Securities and Exchange Board of India (SEBI).

In a filing to the stock exchanges, Zomato said that SEBI, through an email dated August 1, had asked the startup to submit a response on the stock exchanges to concerns raised in media reports on its acquisition of Blinkit. 

Zomato said that the deal value for Blinkit acquisition was INR 4,500 Cr and not INR 7,500 Cr as computed by some media reports. It called the concern on the issue ”factually incorrect”.

Zomato had acquired Blinkit for $568 Mn in an all-stock deal in June this year.

In addition to the deal value, Zomato said it would also be assuming the net debt of INR 673.1 Cr on the books of the target companies – Blinkit and warehousing and ancillary services business of Hands on Trades Private Limited (HOTPL).

The food delivery startup said that the deal value should include only the consideration paid for the purchase of the proposed acquisition targets and should not include any future investments in the acquisition targets by Zomato.

It said many media reports had counted its future investments in Blinkit and loan given by it to the quick-commerce startup in the incorrect deal value of INR 7,500 Cr.

This is the second such clarification by Zomato on Blinkit acquisition in two days. In the shareholders’ letter released along with the financial statements of the startup for April-June quarter of 2022 on Monday (August 1), Zomato founder and CEO Deepinder Goyal addressed the criticism received by the company on corporate governance issues with regards to its acquisition.

On questions raised over the relationship between Blinkit founder Albinder Dhindsa and Zomato cofounder Akriti Chopra, Goyal said that there was nothing to hide about Chopra and Dhindsa’s marriage and that the board was aware of it.

“…all parties, including Akriti herself, made sure that she was never involved in any discussions or decisions with respect to the transaction. We also took an independent opinion from Saraf & Partners on there being no related party transaction under applicable law,” the CEO said. 

On the matter of denying retail investors access to investors’ call on June 25 about Blinkit acquisition, Zomato on Tuesday hinted that many such investors did not complete a mandatory online registration process for generating a link to the conference call. 

“There was a registration process that was required to be completed post which the shareholders would be provided a link to join the call…Therefore, from our end, there was no restriction on participation of retail shareholders in the conference call – and in fact several retail shareholders attended the conference call,” the filing said. 

This adds to a growing list of issues plaguing the foodtech giant. Last month, many investors had complained to SEBI about Zomato’s late disclosures about its acquisition of Blinkit.

In April, the Competition Commission of India (CCI) initiated an antitrust probe against Zomato. The Gurugram-based startup’s shares have also been battered, wiping off more than 62% of investors’ wealth in the last nine months.

The downturn has largely been attributed to Zomato’s acquisition of cash-guzzling Blinkit.

As if this was not enough, it was reported on August 2 that Uber is likely to offload its 7.8% stake in Zomato through a $373 Mn block deal on August 3.

Zomato on Monday reported nearly a 50% decline in consolidated net loss to INR 186 Cr in Q1 FY23 from INR 360 Cr in the year-ago quarter. Its operating revenue jumped 67% year-on-year to INR 1,413.9 Cr.