Exclusive: Flipkart approaches Grofers for acquisition and yes, it makes sense

Grocery and content have become next battlegrounds for large horizontal e-commerce players in India. Amazon is busy beefing grocery play via ‘Pantry’ while Alibaba-Paytm alliance invested a staggering $200 million in BigBasket.

On the other hand, Flipkart had made initiatives in grocery vertical with ‘Supermart’ this year, but it hasn’t been aggressive until now. Currently, the company is providing grocery services in Bengaluru and will soon enter Delhi, Hyderabad, and Chennai.

While Flipkart sees grocery as a potential vertical to achieve scale, it feels acquisition would be the best way to achieve its goals. “The Walmart-run company has begun preliminary talks with Grofers for an acquisition,” reveal two sources on condition of anonymity.

According to them, the talks began a couple of weeks ago and both parties have been showing interest in the deal. “Flipkart sees value in Grofers and the deal makes sense for it as the company is eyeing to achieve a sizeable share in online grocery,” adds one of the above-quoted sources.

Entrackr queries sent to Flipkart and Grofers didn’t receive an immediate response. We will update the post as responses come in.

Grofers’ investors -  Tiger Global and SoftBank are also in favour of the deal, add sources.

A ‘strategic’ plan of action

Since Flipkart has been eyeing upper hand on Amazon and Alibaba in grocery segment, having Grofers in its kitty would instantly inflate its scale. Currently, the online grocery segment is being dominated by BigBasket and Grofers.

While BigBasket has a lead over the Gurugram-based company, Grofers is the only challenger for the Alibaba-funded e-grocer.

Grofers had raised $62 million fresh round from SoftBank, Yuri Milner, and Tiger Global in March this year. However, the valuation of the Albinder Dhindsa-led company had dropped to over 20 per cent in the round.

“The massive haircut in valuation was a sort of indication that the trio wasn’t as bullish as they used to be,” says one of the analysts with big fours. He requested anonymity. He also adds that SoftBank has decided to go with Alibaba in India. Hence, it’s unlikely to back Grofers further.

Recently, Binny Bansal, Chairman of Flipkart had said that the company would slow down on overall startup investments but strategic investments and acquisitions would be a priority. Grofers certainly fits the category of ‘strategic acquisition’ for Flipkart.

While we don’t know whether current talks between the two companies would fructify or not, online grocery segment will witness intense competition amongst Walmart-owned Flipkart, Alibaba-backed BigBasket, and SoftBank-backed Grofers and Amazon.