Zomato’s Blinkit buy is a poison pill

Zomato's official entry into the grocery delivery segment through the acquisition of Blinkit (Grofers) has alarmed investors, despite the fact that the loss-making company is still on its way to profitability. Zomato announced today that it will acquire Blinkit Commerce (formerly known as Grofers India) for $4,447.48 crore ($568 million).

Following the company's announcement on Friday, its shares fell more than 6% today, as analysts believe the company paid more money than it can afford.

“Given the current market conditions, paying such hefty valuations for Blinkit is not a welcoming move for Zomato. Even though the long-term prospect for Blinkit adds value and synergy for Zomato but in the medium, to short term it adds pressure on the balance sheet and financials, “ Kranthi Bathini, director of equity strategy at WealthMills Securities told Business Insider India.

With this acquisition, Zomato enters the grocery delivery segment for the third time. It may also end up with a significant role in its balance sheet as a result of competing in a market with deep-pocketed players such as Tata, Reliance, Amazon, and Flipkart.