Zomato Invests $100 Million in Grofers - Unicorn Status?

Zomato Pursues Stake in Grofers

Updated at 12.05 PM IST, July 1: According to a filing submitted to the Indian regulatory body on Thursday, Zomato is currently seeking approval from the Competition Commission of India to acquire a 9.3% ownership stake in Grofers.

The details of our initial report are presented below.

Zomato's Proposed Investment

Zomato, a leading Indian food delivery company preparing for a public offering later this year, has reportedly agreed to invest $100 million in Grofers. This investment would secure approximately a 10% stake in the online grocer, which is a seven-year-old startup.

This proposed investment values Grofers at over $1 billion. SoftBank currently holds the largest investor position within Grofers. Approval from the Competition Commission of India is required to finalize the deal.

Broader Investment Round

Zomato’s planned investment forms part of a larger funding round. Other investors, including Tiger Global and SoftBank Vision Fund 2, are anticipated to contribute capital as well. Zomato has declined to provide any official comment on the matter.

Potential for Future Acquisition

The leadership of both Grofers and Zomato have maintained a strong working relationship. Discussions regarding a potential investment began earlier in the year.

Furthermore, the possibility of Zomato acquiring a majority stake in Grofers is being considered for the coming quarters. However, a definitive decision will not be pursued until Zomato completes its transition to a publicly traded company, as indicated by a source.

Zomato's Expansion Vision

Zomato, which previously acquired Uber’s Indian food delivery operations, has communicated to key investors its ambition to extend beyond the food delivery sector. The company, based in Gurgaon, envisions a broader scope of services.

Grofers' Growth and Competition

Grofers provides an online grocery delivery service throughout India. The startup has experienced significant growth in popularity over the past year, coinciding with strict lockdown measures implemented across various Indian states to control the spread of the virus.

Grofers competes directly with BigBasket, which was recently acquired by the Indian conglomerate, Tata Group.

Emergence of JioMart

The Indian online grocery market has seen the recent entry of Reliance Industries, India’s most valuable company. Last year, Reliance launched JioMart, its online grocery platform, leveraging its extensive retail network.

JioMart's Customer Base

“JioMart’s growth demonstrates the strength of its established customer base, with 80% of shoppers making repeat purchases. JioMart New Commerce is dedicated to transforming and supporting the small merchant ecosystem, enabling our partners to thrive,” stated Mukesh Ambani, Chairman of Reliance Industries, earlier this month.

He further noted that over 300,000 merchant partners across 150 cities have been empowered to modernize their businesses through digital integration over the past year.

Market Value Projections

Analysts at Bank of America estimated earlier this year that the Indian online grocery delivery market could reach a value of $12 billion by 2023.

Competitive Landscape

“The sector is highly competitive, with both large vertical players like BigBasket/Grofers and horizontal players like Amazon/Flipkart striving to organize the traditionally fragmented market. BigBasket was previously the leading player, achieving $1 billion in annualized GMV and processing over 300,000 orders daily. Reliance Industries entered the market with the launch of its JioMart app in May 20 across 200 cities,” they reported.