Zomato has invested Rs 741.2 crore or $100 million in Grofers. The decision from Zomato comes a day after getting a green signal from the Competition Commission of India for its investment plan.
As per the investment, Grofers’ consumer-facing entity (Grofers India Private Limited) allotted 3,248 preference shares and 1 equity share at an issue price of Rs 15,95,000 per share to raise Rs 518.2 crore or $70 million from Zomato Limited, regulatory filings with MCA show.
According to Arvian Research, the investment is expected to pave the way for a re-entry of the Gurugram-based food tech company into grocery selling.
“It is interesting to note the investment will help Grofers enter into the Unicorn club in the country. India has now 22 strong Unicorn club till now. Also, there is a log term ambition for Zomato gameplan acquire Grofers to enhance its competitive edge in the market,” said Arvian Research.
Entracker report states that the grocer’s wholesale procurement arm Hands-On Trade has also raised Rs 223 crore or $30 million from the publicly-listed company. Following the investment, Zomato has picked up 9.16% and 8.94% stake in Grofers’s B2C and B2B entities respectively.
Grofers’ final valuation couldn’t be determined at this stage as it has yet to allot shares to Zomato in its Singapore-based holding company. According to Fintrackr, Grofers was valued at around $644 million during its last tranche of funding from Chicago-based asset management firm Euler Fund in February this year.
The deal would bring back grocery ordering on Zomato after close to a year. It entered the grocery business through ‘Zomato Market’ in April 2020 but shut it down within a few months. According to analysts tracking the segment, Grofers would power the grocery vertical for Zomato, though it is unclear whether the delivery fleets of both companies will consolidate or continue to operate independently.
It’s worth noting that Zomato has picked up stakes in Grofers’ Indian entities, not in its Singapore-based holding entity. All investors (except Zomato) including SoftBank, Zomato and its early backer Sequoia Capital own stakes in Grofers via holding company.
If Zomato fructify its ambition to acquire Grofers, then the food tech major will streamline its long-term game plan to sharpen its capability to fight against Swiggy Instamart, BigBasket and Dunzo.
As per the recent regulatory filings, Grofers revenue grew 78.52% to Rs 2,289.2 crore in FY20 from Rs 1,282.3 crore in FY19. Around 92.8% of the revenue came from the sale of groceries while commission and advertising revenue collectively stood at Rs 160.6 crore. Overall, the company had recorded a loss of Rs 1,181.2 crore in FY20.
(The story is based on Entracker input)