In a move that is set to intensify competition in India’s soon-to-be USD 25 billion e-grocery market, local food tech giant Zomato and American hedge fund Tiger Global have agreed to write a USD 120 million check for online grocery startup Grofers.
The funding round values the Gurugram-based startup at over USD 1 billion, making it the latest company to enter the unicorn club.
Tiger Global is a backer of Zomato and has reportedly pumped in over USD 150 million since it joined the cap table of Gurugram-based firm in 2020. Of the total funding amount, Zomato will invest USD 100 million, while the rest will come from existing backer Tiger Global’s coffers, according to a report by local media Economic Times (ET), citing sources. The New York-headquartered firm made a bet on Grofers in 2015, choosing it over rival BigBasket, which was recently bought out by Indian salt-to-software conglomerate Tata Group for almost USD 1.2 billion. Three years later, SoftBank came onboard the cap table of Grofers and now owns about 50% of the company.
Zomato is in the process of getting approval for the investment from the market regulator Competition Commission of India (CCI), the report said.
The development comes as Zomato, which is currently valued at USD 5.4 billion, prepares to go for an initial public offering next month. On the other hand, Grofers has reportedly scrapped plans to list on the Nasdaq in the US through a Cantor Fitzgerald blank-check firm after investment talks with Zomato began.
Zomato’s investment in Grofers would help the food giant venture into the online grocery segment again. The company had tried grocery delivery briefly by partnering with fast-moving consumer goods companies and e-grocers BigBasket and Grofers soon after the COVID-19 pandemic hit India in March 2020. It was about the same time that it began looking at acquiring Grofers in an all-stock deal. However, five months after starting its grocery service, Zomato exited the segment, claiming it was not its core business.
“We did groceries through Zomato Market because the food delivery business was negligible during the lockdown. For three-six months, it worked really well and helped us get through the crisis. Eventually, it didn’t make sense,” Deepinder Goyal, co-founder and CEO of Zomato, told ET in an interview earlier this March.
The move will bring Zomato at par with nemesis Swiggy, which ventured into e-grocery in 2019 and has been expanding its footprint in the segment through its hyperlocal delivery services such as Instamart, Swiggy Stores, and Supr Daily. The Bengaluru-based food delivery giant recently raised USD 800 million from Falcon Edge, Amansa Capital, Think Investments, and Goldman Sachs, among others, at a valuation of USD 5 billion. The company is further reported to be in talks with SoftBank for a USD 450 million check.
As for Grofers, the latest capital infusion will help it top up its war chest against rivals BigBasket, which now has deep-pocketed parent Tata Group, and JioMart, an e-commerce marketplace backed by Indian oil-to-telecom conglomerate Reliance, which started operations last year beginning with groceries and essentials.