In what potentially presents the first signs of unsustainability in the existing quick commerce — or q-commerce — model, 10-minute grocery delivery company Blinkit has agreed to merge with food-tech platform Zomato as the former finds itself in a cash-crunched situation, two people aware of the matter told The Indian Express.

The two companies are learned to have signed a term sheet for the all-stock merger and are expected to approach the Competition Commission of India (CCI) as early as this week seeking its approval.

Meanwhile, Zomato on Tuesday told bourses it was extending a $150-million loan to Grofers India Pvt Ltd to support the latter’s “capital requirements” in the near term. It added it was buying a 16.66 percent stake in food robotics company Mukunda Foods for $5 million. Even as the merger’s minutiae are being finalized, it is learnt that shareholders of Blinkit will get one share of Zomato per 10 shares of Blinkit held, one of the people cited above said. Blinkit’s shareholders include marquee investors Softbank and Tiger Global.

Last year, Zomato had invested $100 million in Blinkit for a nearly 10 percent stake. The food-tech platform extended another $100 million earlier this month as Blinkit faced severe cash-crunch. Based on Zomato’s latest market capitalisation, Blinkit’s value is likely to be $700-$750 million, another person said. Zomato and Blinkit did not reply to queries until print.

The e-grocer had pivoted to the 10-minute delivery segment rebranding itself as Blinkit from Grofers. As per sources, Blinkit and Zomato had been in merger talks since at least April 2020.

The merger would mark the beginning of consolidation in the q-commerce segment that has several deep-pocketed and new players in it. It could also potentially push companies into adopting more sustainable business models.

Retail experts have flagged concerns with the sustainability of the q-commerce model as these companies promise to make small-ticket-sized deliveries with nil or low delivery fees, in an effort to acquire customers. However, such a model made the companies face high cash-burn rates, compared to the other large-format online grocers.

Over the last year, the q-commerce segment has also heated up with several deep-pocketed players entering the space. Following Blinkit, Mumbai-based startup Zepto launched 10-minute deliveries, after which players such as Softbank-backed Swiggy, Tata-owned Bigbasket, RIL-backed Dunzo, and ride-hailing giant Ola have also placed their bets on the quick delivery space.

In the build-up to the Zomato investment deal, one of Grofers’ co-founders, Saurabh Kumar, had exited the company last June, although he continues as a board member and shareholder.

In February, Zomato said it had set aside $400 million to invest in q-commerce, claiming that the segment offered a “huge addressable market” and was synergistic with its food delivery business.