The financing will likely value the Albinder Dhindsa-led Grofers at around $1.5 billion, said sources, up from $1 billion when
Zomato first invested in the SoftBank-backed startup earlier this year with a $100 million cheque.
“Talks are on between the two companies and Zomato is most likely to invest the full $500 million by itself,” said one of the people cited above. “There were some discussions with SoftBank and others, but those have not fructified into anything yet.”
Zomato is doubling down on Grofers to bolster its instant delivery play.
$1-Billion Investment Plan
The big bet on Grofers comes after
Zomato’s on-again, off-again attempts at grocery delivery over the past year. The fresh capital will hike Zomato’s holding in Grofers to about 30% if the transaction goes through. SoftBank Vision Fund holds almost 45% in Grofers as its largest shareholder, while Tiger Global and Sequoia Capital are common investors in Zomato and the grocery etailer.
Representatives for Zomato and Grofers said they did not have a comment to offer on ET’s query about the investment deal.
The Deepinder Goyal-led Zomato
which had a bumper listing on the Indian bourses in July has been on an investment spree. Its tracked startups such as logistics tech firm
Shiprocket, discovery platform for offline retailers Magicpin and fitness platform Curefit, as part of its strategy to deploy $1 billion in young companies.
ETtechLast week, while announcing Zomato’s quarterly results, Goyal said in a blogpost, “Within all the businesses that we are looking at today, quick commerce (delivery of products in less than 30 minutes) is clearly emerging as one of the most promising ones. While we decided to not build quick commerce on our platform, we are excited about the progress our partner company, Grofers, has made in the 10-minute delivery space. We are likely to invest more in this space in the near term…”
Global Gameplan
What Zomato wants to do is akin to the playbook used by the likes of Chinese internet behemoth Alibaba and Tencent to invest in ecosystem players that either lead to windfall gains or potential M&A opportunities.
ETtechCloser home, InfoEdge, which runs sites like job portals like Naukri, Jeevansaathi, among others, has styled itself as a corporate venture capital firm. Two of its portfolio firms — Zomato and PB Fintech, which runs Policybazaar — have debuted on the Indian public markets.
Goyal
told ET in an exclusive interview last month that the company was looking to back businesses that would add more than $10 billion to its market capitalisation. “We are investing in some really good founders and companies — all in synergistic or adjacent areas to our business. We hope that over time, some of these will choose to merge with Zomato to continue on their growth path. We are not asking any of these founders or companies for future M&A rights. We want chemistry to do the work here,” he had said.
There is a possibility of Grofers merging with Zomato — something that has been spoken about as a likely outcome, going ahead. Goyal had told ET that as a worst case scenario, the Grofers bet will be like a financial investment that will give the company some returns. “Hopefully, it is not a financial but a strategic bet. And we’ll see whether it makes sense for us to merge at some point or not. But right now it’s too early to say anything,” he had said last month.
Swiggy’s Push
Zomato’s move to double down on the fast-growing quick delivery segment, which is recording rapid growth with new and existing players, comes on the back of rival Swiggy prioritising its Instamart, which specialises in grocery deliveries in 15-30 minutes.
In an
interview with ET in July, Swiggy’s Sriharsha Majety said as much as 25% of the company’s revenue was coming from non-food delivery businesses, which he sees growing further in the next five years.
Majety said Swiggy planned to use $1.25 billion of new funding to invest heavily in non-food verticals such as hyperlocal grocery and essentials delivery service Instamart.
ETtechET
reported on September 28 that Swiggy was in talks to close another financing round at a $10-billion valuation, double that of its previous round, led by US asset manager Invesco, in what is a likely re-rating exercise stoked by Zomato’s market cap.
On Wednesday, Zomato’s stock ended the day’s trade down about 1% at Rs 156.65 apiece on the Bombay Stock Exchange, and its market cap stood at Rs 1.23 lakh crore.
Quick Commerce Buzz
Following the accelerated adoption of online grocery aided by the Covid-19 pandemic, platforms are bringing back quick delivery small warehouses within neighbourhoods — what they call dark stores. Dark stores are small warehouses in dense areas of a city from where orders can be serviced quicker.
The hyperlocal delivery model emerged as a fad back in 2015-16 but was short-lived. Startups such as Grofers, Peppertap (which shut down in 2016) were early proponents of the model.
On Wednesday, Grofers said in a blogpost that it had
opened 200 dark stores in the last three months and would add 150 more in the next 45 days. Industry sources said Instamart and Grofers may be clocking 80,000-100,000 deliveries per day. Grofers, which has made many pivots and changes in its business model over the years, is now focused on the rapid grocery delivery segment, as it moves away from scheduled deliveries. BigBasket is the largest player in the scheduled grocery delivery market.
Mumbai-based new kid on the block Zepto also operates in the quick commerce grocery category and recently
raised $60 million, led by US investment fund Glade Brook Capital, an investor in Zomato and US grocery startup Instacart. Zepto is the only startup offering this service as a core offering in a market dominated by bigger players such as Instamart, Dunzo, and Tata group-backed BigBasket.
