- Food delivery and restaurant discovery site Zomato is learned to be in talks to acquire online grocery retailing startup Grofers in an all-stock deal.
Food delivery and restaurant discovery site Zomato is learned to be in talks to acquire online grocery retailing startup Grofers in an all-stock deal said two people in the knowledge in what could emerge as a big consolidation step in India’s consumer Internet market.
Grofers, who have seen an increased demand on the back of the COVID-19 pandemic in the last few weeks, is estimated to be priced at about $750 million, said those men. The largest shareholder in Grofers, the Japanese conglomerate SoftBank Vision Fund, may look to invest about $100-200 million in the combined company, sources close to the matter said. SoftBank is an investor in Uber, too.
The conversation between the two Gurgaon-based companies comes on the back of a recent partnership formed by Zomato and Grofers for grocery supply, as first mentioned by ET. It included Zomato Market, the newly introduced grocery service, fulfilling customer orders from offline stores with an established Grofers tie-up.
If the deal goes through, it will be Zomato’s second major buyout that acquired UberEats’ Indian operations earlier this year to boost its domestic food delivery offering.
The Ant Financial-backed firm is currently valued at approximately $3.2 billion, while Grofers was valued at approximately $650 million as per its last round of funding led by the SoftBank Vision Fund last December. Sequoia Capital, a venture capital fund based in Silicon Valley, is a prominent early-investor in both companies.
“They’ve been engaging in talks over the past couple of weeks and they’ve sensed a major gap in the food market. Their pilot running through Delhi NCR appears to have clocked high-order numbers, to begin with further strengthening ongoing negotiations, “an individual in the know said.
“We have partnered with Grofers, along with FMCG companies, local grocery stores, and modern retail chains, to pilot our grocery delivery service. We are not aware of any other conversation with Grofers.”
Zomato aims to exploit its last-mile delivery experience while profiting from a wide variety of private labels that Grofers manufactures.
Although the margins in the grocery industry are small and SoftBank’s additional capital injection would give both companies leverage in the future to compete against BigBasket backed by Alibaba, Swiggy, and Amazon and Flipkart like. The largest investor in Zomato is Alibaba’s subsidiary, Ant Financial.
“Grocery delivery has always been on our long-term radar as it fits in with our” more food for more people “dream, Goyal told ET last week. “Food distribution and grocery storage are the two biggest repeat cases for urban consumers. Over the last few months, before the coronavirus outbreak, the volumes of food distribution had started plateauing, “an investor who was directly aware of the deal said. “The only way to develop is to extend to the neighboring companies,” he said.
Zomato also had talked for a possible merger with BigBasket but the talks were preliminary, said sources. “Alibaba, an investor in BigBasket, was keen to combine it with Grofers and Zomato … but it wasn’t an easy deal to pull off,” a source said on anonymity condition.
The Indian e-grocery industry has witnessed a bunch of these merger talks being held before but so far no agreement has been reached. BigBasket and Grofers had discussed a possible partnership in 2017 when Amazon had talked to purchase BigBasket but the negotiations did not succeed in reaching an agreement.
Source- Economic Times