Food delivery platform Zomato may not need the competition regulator's nod to acquire online grocer Blinkit as it plans to use the so-called 'de minimis' exemption, sources familiar with the development said.
This will help expedite the deal, giving Blinkit much-needed runway, as it wages a brutal battle for survival in India's fiercely competitive quick commerce space.
The Uber Eats precedent
As it happens, Zomato used the same interpretation of competition law when it acquired Uber Eats India a couple of years ago. But the antitrust regulator later ordered a probe where it looked at two aspects of the deal- one, whether the deal is anti-competitive, thereby hurting consumers, and two, whether the two companies should have notified it about the transaction.
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What is De Minimis?
"De Minimis", is a Latin phrase used to describe something that is not significant or important. According to a circular issued in 2016 by the Competition Commission of India, acquisitions where enterprises whose control, shares, voting rights, or assets are being acquired have assets of not more than Rs 350 crore in India or a turnover of not more than Rs 1000 crore in India, are exempt from the regulator's mergers and acquisitions norms for 5 years.
In other words, these M&A deals are "De Minimis", so the parties involved don't have to notify CCI or approach it for approval. The Government extended this exemption by 5 more years till March 2027, in a bid to improve the ease of doing business. In this case, sources said Zomato has received a legal opinion that recommends this exemption, as Blinkit's turnover is less than 1000 crores.
Zomato to buy Indian entity
Competition law aside, the other tangle is Blinkit's (previously Grofers) domicility. While the startup is based in Gurugram, it is registered in Singapore. To get around this, Zomato will acquire Grofers India Private Limited (GIPL), a subsidiary of the Singapore entity. Acquiring a foreign entity would have made the deal more complicated, thus delaying approvals.
While Zomato and Blinkit have already signed a preliminary term sheet, the next step now is to sign a definitive agreement between both parties. A Zomato spokesperson did not respond to queries on the deal.
Moneycontrol reported last month that the merger, an all-stock deal, will happen at a valuation of $700 million. Zomato also extended a $150 million loan to support Blinkit, as it stitches up plans for an eventual merger. It said the loan would support the capital requirements of GIPL and is in line with its intention of investing up to $400 million in quick commerce in India over the next two years.
The lifeline comes at a time when Blinkit has laid off employees, shuttered dark stores, and delayed some vendor payments, amid intense competition in the quick commerce space.
The company also faced complaints on social media storm for promising lightning-fast grocery delivery and then for not being able to commit to its promises many times, in the last few months. Customers alleged that their orders were shown as delivered even though they didn't get any delivery in the stipulated time.
Everybody loves Qcommerce
While the jury is still out on whether people actually need essentials in 10 minutes and if this is a sustainable business model, competition has heated up in this space. From new entrants such as Zepto to Swiggy's Instamart to Dunzo to Zomato-backed Blinkit, everyone wants a slice of the action.
Apart from Blinkit, Swiggy, Zepto, and Google-backed Dunzo, Walmart-owned Flipkart, Amazon, Tata-owned BigBasket, and Reliance-JioMart are all hankering after quick commerce, as more Indians shop for daily essentials online.