Decoding $88.5 Mn Udaan-Shopkirana stock deal

B2B e-commerce platform Udaan has acquired Shopkirana in an all-stock deal, marking a notable consolidation in the grocery commerce space. While both firms have termed the deal strategic, Entrackr’s analysis suggests it is an unremarkable acquisition from an investor’s perspective.

According to regulatory filings, the board of Info Edge has approved the transfer of its entire 26.14% stake in ShopKirana, held through its wholly-owned subsidiary Startup Investments Holding Ltd (SIHL), to Hiveloop Technology Pvt Ltd (HEPL), a subsidiary of Trustroot Internet (Udaan’s parent entity) based out of Singapore.

In return, Info Edge will receive 1.68 crore shares of Hiveloop Technology, which translates to around 0.91% of HEPL on a fully diluted basis. These shares are linked to 73,561 reference shares at the Udaan parent and are valued at approximately $23.13 million, as per the agreement.

The swap pegs Shopkirana’s total enterprise value at roughly $88.5 million, based on the value attributed to Info Edge’s minority stake (26.14%). According to the disclosure, the transaction is subject to customary closing conditions mentioned in the agreements.

According to Entrackr’s analysis, ShopKiarana will get a 3.48% value of Udaan’s India business as per the Info Edge holding in Udaan’s Indian entity. 

Shopkirana has raised over $50 million in its lifetime from Info Edge, Sixth Sense Ventures, Oman India Joint Investment Fund, and others.

Founded in 2015, ShopKirana focuses on digitizing procurement for kirana stores across smaller cities such as Indore, Bhopal, Lucknow, Agra, Surat, and Meerut. Its integration with Udaan will expand the latter’s reach in high-frequency categories like fast-moving consumer goods (FMCG) and hotel, restaurant, and catering (HoReCa) business.

For the fiscal year ended in March 2024, Shopkirana’s gross revenue decreased 6.26% to Rs 639.16 crore in FY24 from Rs 681.81 crore in FY23. However, the firm managed to reduce its losses by 30% to Rs 55 crore in FY24. Its FY25 results have yet to be reported.

The transaction is yet another indicator of the investor fatigue, and challenges in the grocery commerce space. Firms have found it extremely difficult to squeeze out profits, even as scale has been relatively easier to acquire thanks to the sheer size of the category. Only the biggest will offer a market based exit to investors, while consolidation might be the way out for the rest. 

ShopKirana has probably tried to become acquisition ready by controlling costs, but paid a price in terms of topline growth. For Udaaan, which has been on a push towards reducing EBITDA losses for the past two years, a stock swap is the best outcome while it hopes for an upside in due course. With any potential exit some time away, ShopKirana is a relatively low risk acquisition that it will hope can surprise on the upside.