SoftBank-backed e-grocer Grofers may become the first Indian startup to go public through a merger with a special purpose acquisition company (SPAC).
The Gurugram-headquartered startup is in talks with American financial services Cantor Fitzgerald’s SPAC to list on Nasdaq in May, a report by local media Economic Times (ET) said, citing sources. Grofers is expecting to raise between USD 400 million and USD 500 million at a valuation of more than USD 1 billion, the report added.
Also known as blank check companies, SPACs are shell companies that are formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing private company. After the acquisition, a SPAC is usually listed on one of the major stock exchanges. For private companies, SPAC is an easier and cheaper alternate route to raise funds, as compared to the traditional IPO process, which is cumbersome, expensive, and time-consuming.
Although, SPACs have existed for decades, it was last year that they became increasingly popular. According to a Reuters report, based on data collated by Dealogic, US-listed SPACs have raised a record USD 82 billion through IPOs last year, while more than 120 SPACs have raised USD 36.19 billion by mid-February 2021.
Towards the end of last year, SPACs gained attention in Southeast Asia as well, with Indonesian unicorns like Tokopedia and Traveloka considering it as a possible option to go public. It seems that this trend may also catch up in India.
According to the ET report, Grofers is in discussions with a few other SPACs as well for the listing, although it could still opt for a regular IPO without merging with a SPAC.
Founded in November 2013 by Albinder Dhindsa and Saurabh Kumar, Grofers has been growing steadily despite seeing a fair share of pivots and struggles in a bid to gain and retain market share. Currently, the company is present in 38 cities and has partnered with 12,000 offline stores to fulfill customer orders. Since the onset of pandemic last year, Grofers has added 5,000 new stores as internet users in smaller cities grew multi-folds during the COVID-19-induced lockdown. Reportedly, the e-grocer’s sales volume grew 80% in 2020, however, its aim to achieve overall profitability by 2020 has now shifted to 2021.
According to a recent report by Bengaluru-based consulting firm RedSeer, there were 154 million households that transacted online in India in 2020, and this number is poised to grow to 233 million by 2025.
Grofers’ direct rival BigBasket has been recently acquired by Indian conglomerate Tata Group, which is likely to help the company increase its market share in the rapidly growing e-grocery market. Apart from Grofers and BigBasket, the online grocery market is crowded with deep pocketed players such as Amazon, Walmart-owned Flipkart, and Reliance’s JioMart. RedSeer projects e-grocery to touch USD 24 billion by 2025, which is still minuscule compared to the total grocery market size of USD 850 billion. Before the pandemic hit the country, RedSeer was expecting it to grow to USD 3 billion by 2020 from USD 2019.