Exclusive: Zomato invests $100 Mn in Grofers' Indian entities

A day after getting a green signal from the Competition Commission of India, Zomato has invested Rs 741.2 crore or $100 million in Grofers. The investment would also mark a re-entry of the Gurugram-based foodtech company into grocery selling. And the entry of Grofers into the bulging Unicorn club. Now 22 strong, counting just 2021 entrants. 

Grofers’ consumer-facing entity (Grofers India Private Limited) has allotted 3,248 preference shares and 1 equity share at an issue price of Rs 15,95,000 per share to raise Rs 518.2 crore or $70 million from Zomato Limited, regulatory filings with MCA show.

The grocer's wholesale procurement arm Hands-On Trade has also raised Rs 223 crore or $30 million from the publicly-listed company. Following the investment, Zomato has picked up 9.16% and 8.94% stake in Grofers’s B2C and B2B entities respectively.

Grofers' final valuation couldn’t be determined at this stage as it has yet to allot shares to Zomato in its Singapore-based holding company. According to Fintrackr, Grofers was valued at around $644 million during its last tranche of funding from Chicago-based asset management firm Euler Fund in February this year.

The deal would bring back grocery ordering on Zomato after close to a year. It entered the grocery business through ‘Zomato Market’ in April 2020 but shut it down within a few months. According to analysts tracking the segment, Grofers would power the grocery vertical for Zomato, though it is unclear whether the delivery fleets of both companies will consolidate or continue to operate independently.

Zomato’s investment in Grofers could also set the stage for the latter's acquisition by the former. According to sources, the foodtech major is likely to acquire the e-grocer in the long haul to ramp up its play against Swiggy Instamart, BigBasket and Dunzo.

It’s worth noting that Zomato has picked up stakes in Grofers’ Indian entities, not in its Singapore-based holding entity. All investors (except Zomato) including SoftBank, Zomato and its early backer Sequoia Capital own stakes in Grofers via holding company.

Some media reports also suggested that Tiger Global may participate in this round. However, the company is yet to file any documents in India or Singapore.

While Grofers’ Singapore-based company is yet to file annual financial statements for FY21, the company’s revenue grew 78.52% to Rs 2,289.2 crore in FY20 from Rs 1,282.3 crore in FY19. Around 92.8% of the revenue came from the sale of groceries while commission and advertising revenue collectively stood at Rs 160.6 crore.

Overall, the company had recorded a loss of Rs 1,181.2 crore in FY20.