Zomato, one of the two major Indian food delivery startups that freshly got its hands on grocery and daily essentials delivery since last month seems to want a firmer grip in the playground, as the Gurugram-based company is reportedly in talks with grocery startup Grofers for a possible acquisition.
Both Zomato and Grofers are backed by Sequoia Capital.
Local media Economic Times (ET) citing two sources said both the companies are in discussions for an all-stock-deal which values Grofers at USD 750 million.
Zomato has, however, denied any such talks. “We have partnered with Grofers, along with FMCG companies, local grocery stores, and modern retail chains, to pilot our grocery delivery service. We are not aware of any other conversation with Grofers,” a Zomato spokesperson said and quoted in the same ET report.
In mid-March, seeing the demand for grocery delivery shooting through the roof as the novel coronavirus forced the country to go under lockdown, Zomato swiftly decided to partner with Grofers to try its hand in the soon-to-be USD 10.5 billion e-grocery space.
“They have been engaged in talks (with Grofers) over the past few weeks sensing a big opportunity in the grocery segment. Their pilot run across Delhi-NCR (National Capital Region) seems to have clocked high order numbers to start with further strengthening the ongoing negotiations,” one of the sources told ET. “Zomato had also held talks with BigBasket for a potential merger, but the talks were preliminary.”
SoftBank Vision Fund (SVF) might invest anywhere between USD 100-200 million in the merged entity. While SVF is the majority shareholder in Grofers, its portfolio company Uber owns a 10% stake in Zomato after the latter acquired Uber’s food delivery operation Uber Eats in India for USD 350 million.
If the deal goes through, Zomato would be able to tap the wide range of private labels that Grofers manufactures, while leveraging its last-mile delivery expertise to rise to the top in the grocery space, which is currently dominated by Alibaba-backed e-grocer BigBasket.
With the USD 100-200 million additional capital that SoftBank will put in the merged entity, Zomato will be able to give a tough competition to BigBasket, Naspers-backed Swiggy, and online retailers such as Amazon and Flipkart which have been focusing on the delivery of the essential items as the lockdown has suspended their larger e-commerce operations for the time being.
With an eye on Grofers, the Gurugram-based homegrown food delivery giant is aiming for a bigger pie in this rapidly growing segment. The proposed deal would take Zomato on par with Swiggy, which entered hyperlocal delivery space with the acquisition of milk-delivery startup Supr Daily in 2018 and doubled down on the segment last year with its twin hyperlocal services: Swiggy Stores and Swiggy Go.
On Monday, Swiggy said it has expanded its delivery of groceries and household essential services to over 125 cities.
“The service is being fulfilled through neighborhood stores and distribution centers of large brands,” the company said in a statement. It has partnered with several national brands and retailers such as Hindustan Unilever, Proctor & Gamble, Godrej, Dabur, Marico, and Cipla, among others, to supply branded essential products and food items.
Swiggy has also revamped its pickup and delivery service Swiggy Go by launching a hyperlocal delivery service ‘Genie’ in over 15 cities, the company said.