Zomato CEO Addresses Corporate Governance Concerns Around Blinkit Deal

Zomato’s decision to acquire Blinkit was taken after objectively evaluating all the available acquisition opportunities in the quick commerce space, the foodtech startup’s founder and CEO Deepinder Goyal said on Monday (August 1). 

After zeroing in on Blinkit, Zomato further ensured that “rigorous and detailed due diligence, deliberations and negotiations were done” before agreeing to the transaction terms, Goyal said.

In a shareholder’s letter, released along with Zomato’s results for Q1 FY23, Goyal tried to address the criticism received by the startup around corporate governance issues with regards to Blinkit’s acquisition. 

Speaking further on the matter, Goyal said that there were two major criticisms around the deal – Blinkit’s valuation and the relationship between Blinkit founder Albinder Dhindsa and Zomato cofounder Akriti Chopra.

“We negotiated hard on valuation but at the same time, had no intention to be opportunistic since it is important to be fair to the team on the other side who is going to build this business going forward,” said Goyal.

He further 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,” Goyal added.

It must be noted that Zomato had promoted Chopra to the position of cofounder from her prior role as the CFO, ahead of its IPO. However, Zomato did not make any disclosure about her relationship with Dhindsa in its exchange filings while announcing its Blinkit investment last year or during its acquisition in June.

Blinkit’s Performance

Zomato also addressed the concerns around Blinkit’s core fundamentals. The foodtech startup’s shares had slipped significantly after the deal was announced last month as investors and analysts feared that adding Blinkit, a loss-making company, to its portfolio could elongate Zomato’s path to reach profitability.

However, Zomato on Monday said that Blinkit’s loss is declining every month. The quick-commerce startup’s adjusted EBIDTA loss declined to INR 107.7 Cr in May from INR 204 Cr in January 2022. Meanwhile, the loss figure is estimated to decline further to INR 92.9 Cr in July as compared to INR 204 Cr in January 2022.

As per Zomato, Blinkit has also shut down a number of unviable dark stores that were not scaling, which has helped in bringing down the loss.

Explaining how Blinkit will add value to Zomato, its CFO Akshant Goyal said that quick commerce cuts across a wide range of essential spends including grocery, fruits and vegetables, beauty and personal care, OTC medicines, stationery items, among others. “Therefore, we expect the overall customer base, average order value as well as monthly order frequency to be higher than food delivery.”

Deepinder also added that Zomato has no plans to make any more minority investments as the food delivery startup is in a “cash conservation mode” and is also executing the already-made investments.

Zomato reported narrowing of its consolidated loss to INR 186 Cr in June quarter of FY23 from INR 360 Cr reported in the year-ago quarter. Its operating revenue also jumped over 67% year-on-year (YoY) to INR 1,413.9 Cr.

While its B2B business Hyperpure’s revenue grew 260% YoY to INR 2.7 Bn in Q1, Zomato said that its food delivery business achieved break-even at adjusted EBITDA level in the quarter.