Blinkit is now more valuable than Zomato’s food delivery business: Goldman Sachs

The implied value of Blinkit, the troubled high-speed commerce startup that Zomato acquired in a fire sale in 2022, is now greater than that of Zomato’s core business (food delivery), Goldman Sachs analysts said in a note published on April 25.

Goldman Sachs now values ​​Blinkit at Rs 119 per share against a stock valuation of $13 billion. That is higher than the food delivery sector, which is valued at Rs 98 per share.

The $13 billion valuation for the rapid e-commerce delivery player is an upgrade from Goldman Sachs’ previous estimate of $8 billion (according to an April 4 report). The upgrades were driven by higher gross order value (GOV) estimates for Blinkit, which are about 50 percent higher than estimates from a year ago, Goldman Sachs said.

Zomato had acquired Blinkit for $568 million in 2022, but since then the latter’s implied valuation has grown to $13 billion on the back of improved performance, Goldman Sachs analysts said. On an annual basis (on an annual basis), the valuation has increased more than six times.

“We note that Blinkit’s implied valuation in the sum of its parts (SOTP) of our Zomato is now (nearly) $13 billion, up from $2 billion in March 2023, with an implied per share value of Rs 119 higher than food delivery , namely Rs 98. for the first time,” the note said.

According to Goldman Sachs, the fast delivery player is likely to see a compound annual growth rate (CAGR) of 53 percent in its GOV between fiscal years 2024 and 2027. This will also deliver an adjusted revenue CAGR of 32 percent for Zomato on a consolidated basis, it added.

Zomato’s expected CAGR revenue is the highest within Goldman Sachs’ food delivery and internet coverage in India.

Goldman Sachs sees further opportunity for a revaluation of Zomato’s valuation multiples as profitability continues to improve, especially in fast trading.

The brokerage highlighted that Zomato’s EBITDA margin is the highest among global food delivery platforms and a similar scenario is likely to play out in high-speed commerce, whose margins could be higher than those of the food delivery sector.

Goldman Sachs maintained a ‘buy’ rating on the stock and raised the price target for the food delivery aggregator to Rs 240 from Rs 170 earlier. Of the 28 analysts covering Zomato, 24 have a ‘buy’ rating while the rest has a ‘hold’ recommendation. According to the brokerage, The Street is underestimating Zomato’s growth and earnings potential in the online grocery segment.

Shares of Zomato were trading at Rs 185.55 at 12 noon on April 26, up 2 percent.