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SoftBank May Lead $150 Mn Funding Round In Grocery Startup Grofers

SoftBank May Lead $150 Mn Funding Round In Grocery Startup Grofers

SoftBank has decided to double down on its investment in Grofers

Talks of a merger between Grofers and BigBasket have not progressed

Metro AG may also participate in the funding round

Gurugram-based online grocery startup Grofers may soon raise $140 Mn-$150 Mn (INE 1027 Cr- INR 1100 Cr) in a fresh funding round led by Japanese conglomerate SoftBank’s Vision Group, with participation from German retail group Metro AG.

Reports cited sources as saying that SoftBank has decided to double down on its investment in Grofers, as SoftBank and Alibaba’s plans for a possible merger between Grofers and its rival BigBasket have not progressed.

Founded in 2013 by IIT graduates Albinder Dhindsa and Saurabh Kumar, Grofers offers products across categories such as grocery, fruits and vegetables, beauty and wellness, household care, baby care, pet care, bakery, and meats and seafood, among other things. It operates in 13 cities.

SoftBank had earlier led a $62Mn funding round in Grofers, acquiring 35-40% stake in the company in February.

Existing investors Tiger Global, Russian billionaire Yuri Milner, and Sequoia Capital are also likely to participate in the new round. If the investment goes through, SoftBank may become a major shareholder while Tiger Global is the second-largest shareholder in Grofers.

Sequoia and Milner’s Apoletto are the other two big investors.

The reports further note that Metro was keen to strike a strategic partnership with Grofers wherein it would become an exclusive sourcing platform for the online grocery startup after leading this funding round. However, the deal did not work out.

An email query sent to Grofers didn’t elicit any response till the time of publication, while SoftBank declined to comment on speculation.

Grofers: Going Big On Private Labels For Growth

Grofers closed FY 2018 with $129.49 Mn (INR 950 Cr) in sales. It is now chasing a revenue target of $34 Mn (INR 2,500 Cr) and plans to roll out more than 500 stock keeping units (SKUs) for FY 2019.

Here’s a look at some of the recent activities at Grofers:

  • It is concentrating its energy on private labels — Budget and Popular G-Brands
  • It has expanded its private labels to offer 250 food and non-food products to its consumers
  • Grofers has stopped offering fresh products
  • It is targeting a stronger growth trajectory in 2019, with a 50% contribution from its private brands
  • Grofers has changed its focus to establishing its foothold in Delhi-NCR by investing in its supply chain and technology
  • The company claims to be profitable in Delhi on a per-order basis

Online Grocery Market In India

In a report, Goldman Sachs estimated the Indian online grocery market to reach $40 Mn (INR 270 Cr) by FY19, growing at a CAGR of 62% from 2016 to 2022.

Here’s a look at the grocery delivery segment in India:

  • Flipkart Supermart, Walmart-Flipkart’s online grocery arm, is currently operational in all major pin codes of Bengaluru with plans to expand to five to six major cities by the end of 2018
  • Amazon Pantry, Amazon Prime Now, and the Google-backed Dunzo are some of the other big players making their way into the online grocery segment in India
  • Micro-delivery players such as Milkbasket, Daily Ninja, ZopNow, Satvacart, and Godrej Nature’s Basket are bagging a significant share of online grocery shoppers
  • With plans to touch a $1 Bn gross sales run rate by the end of FY19, BigBasket is aiming at slashing its burn rate

The online grocery sector is expected to almost quadruple over the next three years to touch $1.38 Bn (INR 100 Bn) in terms of revenues.

Earlier this year, Softbank pocketed a neat profit of $2.2 Bn (¥244.9 Bn) for its $100 Bn SoftBank Vision Fund from it’s Flipkart exit. SoftBank has been making big bets in India, catapulting startups into the much-coveted unicorn club. Speculation is doing the rounds that it may also invest in FirstCry, Swiggy, and Zomato.

[The development was reported by ET.]