Zomato now approves granting significant loans to Blinkit. Too many unanswered questions.

After investing $100 mn (Rs 750 cr) for a minority stake in Blinkit (Grofers) last year, Zomato now approves a further investment upto $150 mn (approx Rs 1,150 cr) into the Company.

Key points to note:

  • The subject investment is in the nature of loan to be disbursed in one or more tranches.
  • Rate of interest would be 12% p.a.
  • Maximum tenure of the loan would be 1 year.

Though Zomato has not informed, but the contours of the financing clearly point towards a convertible structure whereby the debt would after one year be converted into equity. Infact, few days back there were news reports of Blinkit’s founder informing it’s internal team that they have got $100 mn commitments from Zomato as a part of bigger ongoing round of $400 mn.

Some important questions that remain unanswered in the subject financing by Zomato –

  • Just few months back, Zomato gave $100 mn to Blinkit. What happened to that? Have they already burned through that? If not, why is Blinkit taking a 12% debt?
  • How has 12% rate been decided and why only for one year?
  • Why there are no disclosures about Blinkit’s financials?
  • What about the speculated Blinkit’s merger with Zomato that’s being widely mentioned by media? Why no denial so far?

All the above questions become exceedingly important as Zomato is now a public company and it is obligated to provide extensive disclosures.

How otherwise are public shareholders supposed to decide about the prudence of such ‘large investments’?

Currently it seems that Zomato is running a listed VC/ PE investment Company !

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