Grofers eyes SoftBank, Tencent big bucks after turnaround, but at a lower valuation

The SoftBank-backed online grocery retailer Grofers is looking to capitalise on its turnaround story as it steps into fund-raising mode more than two years since its back-to-back financing rounds, people close to the matter said.
With monthly gross sales likely to touch Rs 100 crore (including cashbacks and discounts) in January, the Gurgaon-based e-grocer has begun talks with existing investor Soft-Bank and Chinese internet giant Tencent for a possible capital infusion of up to Rs 800 crore, sources told TOI.
While the discussions with Tencent are early, SoftBank is likely to bulk up its shareholding in Grofers, valuing the company at 20-30% lower than the $400-million valuation it fetched in 2015.
Grofers competes with BigBasket, which recently got on board Alibaba and Paytm Mall in a new $200-million funding after many months of being engaged in talks.
SoftBank’s interest in pumping fresh money into Grofers in what is possibly a down round — where a company raises capital at a lower valuation compared to its previous round — comes after it explored raising strategic capital from Amazon.
Grofers was also in talks for a possible merger with BigBasket last year, which ended prematurely. There has also been speculation of Flipkart acquiring Grofers, as both have common investors in SoftBank and Tiger Global, which collectively hold more than 40% in the e-grocer. Venture fund Sequoia Capital is its earliest institutional backer.
An investor privy to Grofers’ financials said, “After a very tough 2016, Grofers is closing in on Big Basket on the next-day delivery front as they have exited the express delivery format.” BigBasket is expected to be clocking around Rs 120 crore in monthly sales, inclusive of about 30% in express deliveries. An email sent to spokespersons at SoftBank and Tencent did not elicit a response.
While Albinder Dhindsa, co-founder & CEO, Grofers, did not comment on its fund-raising plans, he said Grofers has grown four times since February 2017 and doubled since July. “We are the dominant player in the north where we have an 80% market share in online grocery. We were able to do this while moving completely out of the express business and focusing only on next-day delivery, a segment in which we are the largest online grocery nationwide now.”
Hyperlocal delivery players like Grofers got a slug of capital in a hopped up funding environment in 2015 but soon realised that on-demand delivery is a money pit. Even as Grofers strives to stay independent, both Amazon and Flipkart as well as Paytm Mall, have declared grocery as the next big frontier for Indian e-commerce.
We reported earlier that SoftBank was in discussions to back Paytm Mall in what may be a large $400-500 million round. These companies have the ready capital to put behind building supply chain and the back-end which are crucial to create efficiency in the low-margin grocery business. All of which makes it difficult for Grofers to keep itself independent and not align with one of the larger players.
In India, the overall grocery and foods market is estimated at $400 billion, this includes packaged food. But only 5% of the sales is contributed by organised retailers, according to consulting firm Technopak.
Still in their early days, the online grocery platforms rack up sales of about $300 million. The Indian e-commerce market has been built on driving sales through mobile phones and electronics till about 2015. But with the smartphone category starting to look sluggish, players like Amazon began focusing on grocery and consumables, which occupy the largest part of a household's spend and now look to emerge as the most critical piece in the e-tailing wars.

Trending News

Facebook face big challenge to prevent future US election meddling

Intel hit with 32 lawsuits over security flaws

Apple promises fix for serious Telugu character bug

GrabOnRent launches operations in Mumbai and Gurgaon

Crypto fall fails to drown initial coin offerings

Kalpnik uses AR & VR to help people 'go' to any place of worship

SpaceX is launching its broadband satellites into orbit this weekend

Unilever threatens to cut back online ads over 'toxic' content

Google hires former Samsung Mobile CTO to coordinate Internet of Things projects

Go-Jek plans India foray in second half of 2018

Pivoting away from Cube brought us to the right route: PayU's Jitendra Gupta

Ola parent to invest Rs 400 crore to boost Foodpanda India logistics & tech

Alibaba plans tighter integration of Paytm Mall with BigBasket & XpressBees

MakeMyTrip posts wider loss in Q3, may revisit OYO strategy

Google fined Rs 135.86 crore by CCI for 'search bias'

RBI suggests tax sops, self-regulation to build fintech space

Swiggy hires new CEO for its Access Service, gets new CFO

Logistics company Delhivery registers 44% increase in FY17 revenues

WeWork to acquire one of the oldest social networks, Meetup

Toyota, Suzuki to produce electric vehicles for India market by 2020

Qualcomm rejects Broadcom's $103 billion offer

Fashion e-tailer Voonik asks staff to forgo 3 months' salary

EasyRewardz gets $2 million Series-A funding

'Anemic' iPhone 8 demand drags Apple shares lower

Lending platform Lenden Club gets Rs 3.5cr in Equity Investment

On festive sales, Flipkart says 65% clients from Tier-II cities