Zomato Tumbles 6%

    The shares of the food delivery application Zomato fell to 6.4% on Monday as analysts became more concerned on the company's acquisition of the company Blinkit, an instant delivery service firm. Blinkit provides grocery services and other essential items through a mobile application. The stocks which opened at Rs.73 fell as much as 12% and the closing at Rs.65.85. Around 117 million shares were were traded on Monday compared to an average of 43 million shares traded.         

    On Friday, Zomato's board approved the acquisition of Blinkit for Rs.4,447 crore, which is around 570 million dollar deal. As per the deal, Blinkit shareholders will get about 7% of the shares in Zomato at Rs.0.76 per share. The transaction would have a three fold impact on the earnings of Zomato such as increased operating losses to fund Blinkit operations. Blinkit's cash burn could drag down Zomato's valuation by 14%, but Zomato has got 1.6 billion dollars to withstand this situation. Currently Zomato's monthly transaction users is around 15.7 million and Blinkit's monthly transaction users stood up to 2.1 million. Some of the financial services says that it would be better to invest in solid stocks instead to chase hope. Analysts also says that it would earn profit in long run because grocery items usually have a lower margin in the market. Hence we cannot dominate the market at the initial stage, but will definitely show a slow growth in the coming years. One of the reason for the acquisition of the Blinkit is because of the steady growth of the rival Swiggy in the market.