Why Deepinder Goyal went ahead with Zomato-Blinkit deal

In a filing to BSE, he said the objective of good corporate governance is to protect the rights of minority shareholders and that the ultimate test of corporate governance for Blinkit transaction was the requirement of approval from at least 75 per cent of its voting shareholder base.

“The outcome was that 97 per cent-plus of the shareholders’ votes were in favor of the transaction,” he said.

Goyal said even if it is a bad deal for other shareholders, it would be equally bad for him as a shareholder, as his financial outcomes are 100 per cent aligned to other shareholders, given 100 per cent of his compensation is stock linked and that he does not draw any fixed salary.

He cited two key concerns that have been raised. The first where valuation paid for Blinkit is higher than what it should have been. Besides, he said, he has known Albinder (Albinder Dhindsa, Co-founder and CEO at Grofers) in the past, and/ or because one of the senior leaders, Akriti (Chopra), is married to Albinder, the deal reflects poor corporate governance.

“Firstly, we objectively evaluated all available acquisition opportunities in the quick commerce space and after zeroing in on Blinkit, we ensured that rigorous and detailed due diligence, deliberations and negotiations were done before agreeing to the terms of the transaction (like any other company would do for a large and important transaction),” he said.

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Goyal added that his company had multiple external advisors who helped it with various aspects of the transaction, including valuation which was done by EY, and we took an independent fairness opinion from Morgan Stanley.

“We negotiated hard on valuation but at the same time, had no intention to be opportunistic since it is important to be fair to the team on the other side who is going to build this business going forward,” he said.

Besides, Goyal said the relationship between Albinder and Akriti is public and already known and there was nothing to hide there.

“The board was aware of it and all parties, including Akriti herself, made sure that she was never involved in any discussions or decisions with respect to the transaction. This transaction also had no overlap with her role as Chief People Officer at Zomato. We also took an independent opinion from Saraf & Partners on there being no related party transaction under applicable law,” he said.

Goyal said knowing the founder of the company that he is acquiring is actually a good thing to his mind, as it significantly increases the chances of deal success and reduces the blind spots which could lead to value destruction post consummation of the transaction.

“This is especially true for internet businesses where a large part of the value in the business is people and intellectual capital. I would never take this large a bet on people whose motivations I do not know. And I think money is a terrible motivator,” he said.

Zomato said, in six months, the Blinkit business has scaled to 20 per cent of Zomato’s food delivery GOV, while being present in less than 15 cities.

Zomato took about 45 months since the launch of food delivery to get to the current monthly GOV scale of Blinkit.

“I would say that the comparison is not fair since Blinkit is a much older business and the current scale would not have been possible for Blinkit if it was just a 7 month old business. A large part of Blinkit’s current GOV is a) from their legacy customers and b) because of their erstwhile infrastructure, supply side network and knowledge which allowed rapid expansion,”said Chief Financial Officer Akshant Goyal.