Food aggregator Zomato’s path to profitability would get further delayed by another year to FY28E post-integration of Blinkit and the share price may touch a record low level of Rs 48 per share, which downside of over 30 per cent, a domestic brokerage Dolat Analysis Research said in its report.

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The brokerage maintains a Sell rating on the stock as Zomato’s fixation to create Brands & its quest for better service to customers has become a significant hindrance to any kind of business optimization.

Zomato plans to run both apps as separate brands and the lack of private labels makes costs more visible than margin trajectory, Dolat said. It added transaction implies 7.4% dilution in the company's existing share capital and is valued at EV/Rev of 8.1x on May 2022 numbers similar to its own valuation.

The transaction would have a three-fold impact on the earnings of Zomato:

1) Increased operating losses to fund Blinkit operations, currently at about over Rs 13 billion at EBIDTA levels.

2) Impact on Other Income, as investments in Capex (~0.75% of GOV) for Blinkit operations would increase.

3) Over 7.4% dilution in equity, as a result, estimates have witnessed increased losses for the combined entity by 95/133 per cent for FY23/FY24E.

Zomato Ltd on June 24, 2022, said it will acquire Blink Commerce Pvt Ltd (formerly known as Grofers India Pvt Ltd) for a total purchase consideration of Rs 4,447.48 crore in a share swap deal.

The company’s board has approved the acquisition of up to 33,018 equity shares of Blink Commerce Pvt Ltd from its shareholders for a total purchase consideration of Rs 4,447.48 crore at a price of Rs 13.45 lakh per equity share, Zomato said in a regulatory filing.

The shares of Zomato have slumped over 20 per cent since the acquisition announcement to Rs 56 per share levels from Rs 71 per share. The stock on Tuesday is trading 1 per cent higher to Rs 56.85 per share on the BSE as against a 0.5 per share fall in the BSE Sensex at around 12:00 PM.