The prospect of getting into online grocery delivery has sowed interest among Indian technology companies ever since a nation-wide lockdown was kicked off in March. As one of the few essential items that could be sold during the lockdown, essential grocery products became the saving grace for many e-commerce companies.
Even when the lockdown has been partially lifted, it turns out, entrepreneurs’ confidence in this sector is not short-lived as the continued rise in grocery orders has revealed the true potential of this space.
In an attempt to strengthen its stake in online grocery, Alibaba- and SoftBank-backed online retailer Paytm Mall has initiated talks with e-grocery company Grofers for a potential investment, which, according to a local media Economic Times (ET), might also lead to a merger.
In an earlier interaction with KrASIA in October last year, Albinder Dhindsa, co-founder and CEO of Grofers claimed it owns 50% market share.
One of the sources told ET that the deal might not see the day as there are disagreements between both the companies about specific terms. In April, a similar investment-cum-acquisition talk between Alibaba-backed food delivery startup Zomato and Grofers did not go through.
It’s to be noted that SoftBank is a common investor in both companies. While SoftBank Vision Fund is a majority shareholder in Grofers with a 40% equity stake, SoftBank Group owns 20% in Paytm Mall.
“SoftBank does not have any fresh capital, so it is looking to push consolidation, and an investment or a merger between Grofers and Paytm Mall is something that will work…,” one of the sources close to the matter told ET.
Paytm Mall already sells groceries on its app in partnership with Future Group’s physical retail chain Big Bazaar. It also works with Grofers’ biggest competitor, BigBasket, to list its inventory on Paytm Mall.
Parallelly, Paytm Mall is also in discussions to invest or acquire Kalaari Capital’s portfolio company MilkBasket that delivers milk and other dairy products in Noida, Dwarka, Bengaluru, and Hyderabad.
Earlier this month, Reliance also got into the online grocery market which is expected to reach USD 3.6 billion in size in 2024, as it launched its e-commerce platform JioMart in 200 cities. Analysts and investors expect this would fasten the consolidation in this space as no individual player can go against Reliance which has recently raised USD 10 billion in institutional funding from multiple global companies including Facebook.