Why are Zomato shares falling post-acquisition of Blinkit?

Zomato is one of the new-age startups that has changed the way people order food or dine out.

Despite this, it is a cash guzzler and does not have a sure path to profitability. The hike in delivery and service charges is making the platform unpopular.

Now coming to Blinkit (erstwhile Grofers)

  • It was a cash-burn business in the earlier avatar while competing with Big Basket (now part of the TATA Ecosystem)
  • After the pivot towards rapid order fulfillment, it is now competing with the likes of Zepto and not creating any value other than increasing its lifespan before eventual death

Considering this, the acquisition of Blinkit is a wasteful spend by Zomato. The correction in share price is a reflection of the same.

Hope this helps

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Happy Investing!!

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