India’s Zomato sheds nearly $1b in valuation

Shares of India’s Zomato Ltd (ZOMT.NS) fell as much as 8.2per cent on Tuesday, extending losses for a second straight day as investors questioned the rationale of the company’s deal to buy local grocery delivery startup Blinkit.

The Ant Group-backed food delivery firm said on Friday it would acquire Blinkit for 44.47 billion rupees ($568.16 million) in stock, as it tries to gain a foothold in the fiercely competitive quick delivery market. The deal comes after it bought a more than 9per cent stake in SoftBank Group (9984.T)-backed Blinkit for nearly 5.18 billion rupees in August, with a promise to invest as much as $400 million in the Indian quick-commerce market over the next two years.

“We believe Blinkit will require investments beyond the $400 million envisaged by Zomato, given rising competitive intensity,” analysts at Kotak Institutional Equities wrote in a note.

The company’s shares fell as much as 14per cent since the announcement of the offer, shedding nearly 76.78 billion rupees in market capitalization. They are also down nearly 48per cent since going public last July.

The industry was worth $300 million last year and is expected to grow 10-15 times to $5 billion by 2025, according to research firm RedSeer.