The Harsh Reality & Ugly Truth Behind Zomato & Blinkit Merger

The 2 worst corporate governance companies, Zomato & Blinkit merged to destroy shareholder wealth & to save dwindling Husband’s business from the cash reserve Zomato has.

🔸Nepotism was the hottest & the most Trending Indian word in 2020.

🔸A recent example of Nepotism is 2 loss-making start-ups Zomato & Blinkit merger, where the former has decided to merge the latter into itself because Zomato co-founder Akriti Chopra is married to Blinkit founder Albinder Dhindsa.

🔸How can one loss-making company (Zomato) that is alive on Parents’ funds (Investors) for day-to-day operations survive another loss-making company?

🔸Zomato acquisition of Blinkit for ₹4,447 crores in an all-stock deal, valued Zomato per share at ₹~71. It will issue 62.9 crores shares which will lead to a massive 8% shareholding dilution.

🔸Not only this, but Zomato will also acquire the debt of ₹1125 crore it had extended to Blinkit in Feb, out of which 575 Crore is still in the books of accounts as Cash.

🔸Tacitly, on paper the Total acquisition value is ₹7447 crores ( ₹4447+ ₹1125 (Debt)+ ₹1875 Crore (investment to cover losses).

🔸Additionally, in the future too Zomato keep on funding Blinkit losses from the ₹12219.3 Crores of cash it has till its profitability. The value of loss Zomato will fund in future is mammoth for a company on ventilator.

🔸But profitability is illusionary & which means, Zomato will keep funding the losses for infinite years, so can say the deal is much bigger than what is pegged at.

🔸In its Press release, to demonstrate the illusionary growth of 163%, Blinkit disclosed numbers of only Jan’22 & May’22, with a Revenue of ₹22.1 Cr & ₹58 crores. What was the problem with disclosing the numbers for Feb, March, and April?

🔸They have calculated Adjusted EBIDTA on Gross order value but not on Revenue.

🔸Additionally, the number of total orders placed includes canceled orders as well.

🔸The financials are unaudited numbers. The grocery company’s Gross order value is calculated on the Maximum Retail Price (MRP), but it should be adjusted for the discounts applied on each order.

🔸In FY22, Zomato burnt ₹693 Cr of cash against ₹1017.9 Cr in FY21. Its EBITDA margins have increased from -153% in FY18 to -18% in FY22, but still it’s remains unprofitable.

🔸Whereas, in FY21, Blinkit had reported losses of ₹6,127 Cr on revenue of ₹2,700 Cr.

🔸I had previously highlighted the corrupt corporate governance of this poorly governed company. Add this merger to the list.

🔸There is no intention of creating shareholder wealth by Deepinder Goyal. The only purpose of listing was to get funds to survive as long as possible.

Zomato to Blinkit Let’s go bankrupt together. I hope it turns out to be true.