After its successful initial public offering last month, Zomato’s investment of $100 million in Grofers has been approved by the Competition Commission of India(CCI). Current approval has helped Zomato to acquire 9 3% stakes of online food delivery firm while Grofers have joined the unicorn club.
Grofers is a New Member of Unicorn Club
The Competition Commission of India (CCI) has finally approved online food delivery firm Zomato’s $100-million investment in Grofers India and its wholesale subsidiary Hands-on Trades, the Indian market watchdog said on Friday.
CCI tweeted on its official handle, “Commission approves proposed acquisition by Zomato of approximately 9.3% stake in Grofers India and Hands-on Trades.”
The investment talk between Zomato and Grofers started on 29 June 2021 when Grofers signed an agreement to offer 9.3% stakes to Zomato in exchange for a $100 million investment by a food delivery giant.
After signing the contract, Zomato filed papers with CCI in the first week of July to get approval from the Indian market regulatory firm. The media portals also reported that American investment firm Tiger Global also planned to invest $20 million in the same financial round, but there is no confirmation yet from Tiger Global as well as Grofers.
Grofers Journey to Unicorn Club
Founded in 2013, Grofers has established itself as the third-largest online grocery delivery platform in India with a 13 percent market share. BigBasket ranks first among the online grocery firms with a whopping market share of 37%. The above data is based on the research conducted by PGA Labs in the fiscal year 2021. JioMart, a subsidiary of Reliance Retail, has shown exponential growth in recent times and grabbed 4% online grocery market within no time. Amazon and Flipkart rank second and fifth with 15 and 11 percent online grocery market share respectively.
Grofers clocked a total revenue of Rs 176.79 crore in FY20. Grofers losses also grew by 42% to Rs 637.49 crore. Big Basket, the main competitor of Grofers, recorded a revenue of Rs 3818 crore in FY20.
Grofers has raised over $727 million to date. With the current funding, Grofers plans to establish itself in tier-II and tier-III cities of India. Softbank Vision Fund has control over 51 percent stakes of Grofers, while Tiger Global is the second-largest stakeholder with 19.2 percent shares.
With current investment, Zomato has re-entered the online grocery delivery business, after suspending the services in July 2020. The startup started delivering essentials and groceries under the Zomato Market offering following a surge in demand during the first wave of the pandemic and the ensuing nationwide lockdown.
Talking about a recent collaboration with Grofers, Zomato’s chief financial officer Akshant Goyal said, “Grocery is a large opportunity, and it is in a nascent stage but growing rapidly. We think our platform lends itself well to us doing more than what we do today. So, I think we are actively experimenting in the (grocery) space, and recently invested $100 million for a minority stake in Grofers, with the idea of getting more exposure to that space and building our strategies. The company was looking at e-grocery from a purely “experimental” mindset,”
Online grocery market competition is heating up due to the involvement of big players like Reliance, Tata Group, Zomato, Swiggy, and Amazon. In its 44th annual general meeting, Reliance announced that it plans to tie up with 1 crore Kirana stores in the next three years. While, Tata Group acquired 64% stakes in BigBasket, currently the largest online grocery delivery firm. Amazon is going strong with its Amazon Pantry business and is the second-largest online grocery delivery company in India.