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Zomato places an order for Grofers at $750 million valuation

ET Bureau|
Last Updated: Apr 15, 2020, 03.42 PM IST
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If the transaction goes through, it will be the second big buyout made by Zomato which acquired the Indian operations of UberEats earlier this year to bolster its food-delivery offering in the domestic market.

Highlights

  • Zomato wants to leverage its lastmile expertise in delivery while taking advantage of a wide range of private labels on board Grofers.
  • An added capital infusion from SoftBank will give both companies more ammunition to fight Alibaba-backed BigBasket, Swiggy, Amazon and Flipkart in future.
  • Food delivery and grocery are the two highest repeat cases for urban consumers.
MUMBAI/ BENGALURU: Online food delivery app Zomato is in talks to acquire grocery etailer Grofers in an all-stock deal, two people in the know of developments said, in what could possibly herald a big consolidation in India’s consumer internet sector.

Grofers, which has been in the thick of demand from consumers staying put in homes over the past few weeks due to the Covid-19 pandemic, is expected to be valued at around $750 million, the people said.

Japanese conglomerate Soft-Bank’s Vision Fund, the largest shareholder in Grofers, may invest around $100-200 million in the merged entity, sources close to the matter said.

The talks between the two Gurgaon-based companies come close on the heels of a recent partnership that Zomato and Grofers struck for grocery delivery, which ET was the first to report.

The tieup involved Zomato Market, its newly launched grocery offering, fulfilling customer orders from offline stores that have existing arrangements with Grofers.

If the Grofers deal goes through, it will be the second big buyout for the restaurant discovery platform, which acquired the Indian operations of UberEats earlier this year to bolster its food delivery offering in the domestic market.

‘Pilot run clocked high order numbers’
The company, backed by China’s Ant Financial, is currently valued at around $3.2 billion, while Grofers was valued at around $650 million after its last financing round led by SoftBank Vision Fund in December.

Silicon Valley-based venture capital fund Sequoia Capital is a common early investor in both companies. “They have been engaged in talks over the past few weeks, sensing a big opportunity in the grocery segment. Their pilot run across Delhi NCR seems to have clocked high order numbers to start with, further strengthening the ongoing negotiations…” said a person in the know of the matter.

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Zomato wants to leverage its lastmile expertise in delivery while taking advantage of a wide range of private labels on board Grofers.

An added capital infusion from SoftBank will give both companies more ammunition to fight Alibaba-backed BigBasket, rival Swiggy and ecommerce leaders Amazon and Flipkart in future.

Zomato’s lead investor Ant Financial is an affiliate of Chinese internet giant Alibaba.

Interestingly, SoftBank is also a significant shareholder in Uber and is now an investor in Zomato after the sale of UberEats India.

Albinder Dhindsa, cofounder and CEO of Grofers, did not respond to ET's queries. A Zomato spokesperson said, “We have partnered with Grofers, along with FMCG companies, local groceries stores and modern retail chains, to pilot our grocery delivery service. We are not aware of any other conversation with Grofers.”

A SoftBank spokesperson said, “We cannot comment on speculation." Last week, Zomato CEO Deepinder Goyal said, “Grocery delivery has always been on our long-term radar since it fits into our vision of ‘better food for more people’.”

Food delivery and grocery are the two highest repeat cases for urban consumers.

“Over the last few months, before the Covid-19 crisis, food delivery volumes had started to plateau,” said an investor directly aware of the deal. “Expansion to adjacent businesses is the only way to grow,” he added.

Zomato also held talks with BigBasket for a potential merger, but the talks were preliminary, said sources.

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