Goldman Sachs said in a report late Thursday that Indian food delivery giant Zomato's quick-commerce arm Brinkit is now worth more than its core food delivery business, according to the bank's aggregate analysis.
The investment bank values Brinkit's implied value at INR 119 ($1.43) per share, or about $13 billion, while Zomato's food delivery business is valued at INR 98 per share. It becomes. Goldman previously expected Blinkit's valuation to be $2 billion as of March 2023.
Brinkit's soaring valuation is driven by strong growth potential in India's fast-growing quick commerce market. Goldman Sachs forecasts Brinkit's gross order value (GOV) to grow at a compound annual growth rate (CAGR) of 53% between fiscal years 2024 and 2027, surpassing the online grocery market over the same period. This exceeds the overall forecast CAGR of 38%.
Zomato acquired Blinkit in 2022 for less than $600 million.
The investment bank believes that quick commerce in India is driven by 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. We believe the market is poised for growth. These dynamics have allowed Blinkit to offer competitive prices and fast delivery times, driving customer adoption.
Quick commerce, which boomed globally during the pandemic, has since cooled down in many markets. However, India continues to buck this trend. Many analysts say unique factors such as a large unorganized retail sector and favorable demographics, along with attractive unit economics, set India apart.
HSBC analysts wrote in a note this month that India is moving directly from unorganized retail to quick commerce, bypassing the modern retail phase seen in other countries. . The success of quick commerce lies in its ability to mimic the characteristics of a traditional kirana (neighborhood store), such as accommodating small, frequent purchases and offering a wide range of SKUs. With Indian kitchens requiring regular replenishment and limited storage space, quick commerce's proximity and expanded product range make it an attractive alternative for both kirana and modern retail. .
Goldman Sachs estimates India's accessible quick commerce market to reach $150 billion in 2023 in the top 50 cities alone. Despite the presence of well-capitalized competitors such as Swiggy and Zepto, the bank believes the market is large enough to serve up to five cities. Develop profitable players by 2030.
The report suggests that Blinkit is expected to achieve EBITDA breakeven by the June 2024 quarter and generate higher EBITDA margins than Zomato's food delivery business by FY2030.
Blinkit's soaring valuation is likely to have an impact on Zepto and Swiggy, which are planning to go public this year.
Swiggy, which operates the instant commerce platform InstaMart, said this week that it had received shareholder approval for an IPO and expects to raise about $1.25 billion. Swiggy was valued at $10.7 billion in its latest private funding round in early 2022.
Zepto, which is backed by StepStone Group and Y Combinator Continuity, is also competing fiercely with both companies for a slice of India's quick commerce market. The Mumbai-headquartered startup is on track to recently hit $1.2 billion in annual revenue.