Grofers gets DIPP approval for food license, plans to invest $40 Mn

After Amazon India, on-demand online grocery firm Grofers has received DIPP (Department of Industrial Policy and Promotion) approval for food retail in India. Following the nod from the government, the Gurugram based company intends to invest $40 million in its food retail unit.

Grofers was the first who applied for the license since the approval of FDI in retail by Indian government in June 2016, followed by Amazon and Bigbasket.

With this approval the Softbank-backed venture plans to launch private label in grocery, which can help it to improve margins and expand reach. Grofers has been bleeding profusely over the past couple of years.

The company’s loss widened 15 times to Rs 60.87 crore during FY 2015-16 as compared to Rs 3.9 crore in previous fiscal, as per financial data provider Tofler. 

A year ago, the government permitted 100 percent foreign direct investment (FDI) in the food processing sector. As per new rule, a foreign company can open a wholly-owned subsidiary in India to retail food products produced and or manufactured in the country by way of opening stores or online.

Importantly, Grofers is a foreign based entity as it had moved headquarter to Singapore in October 2015. Earlier this month, Amazon had received DIPP approval for setting up food retail unit.

"Going a step beyond our initial commitment to the government, we intend to bring in an additional capital of $40 million within the next few weeks to expand our business further and grow the market," Grofers founder Albinder Dhindsa said in a statement to PTI.

Grofers currently operates in cities like Delhi, Gurgaon, Mumbai, Bangalore, Kolkata, Noida, Pune, Ahmedabad, Chennai, Hyderabad, Jaipur, Lucknow, Surat, including others. So far, the company had raised $165 million from Tiger Global Management and SoftBank, among and others. The last fundraise was $120 million in October 2015.

Recently, online grocery space has been making headlines as e-commerce majors have expressed strong interest in it. Amazon started online grocery platform Amazon Now last year, and currently operates in three cities - Bengaluru, Hyderabad and Gurgaon.

Meanwhile, Flipkart and Paytm are slated to get into grocery soon. Former has already started pilot in Bengaluru. BigBasket was reportedly in talks to get $200 million investment from Paytm and Alibaba. Amazon was also interested in the Bengaluru-based company, however talks fizzled out owing to differences over valuation.