E-grocer Grofers has signed a deal with Zomato and Tiger Global to raise $120 million, and with this being said Grofers will soon turn unicorn. The new financing will value the start-up at a bit over $1 billion.

According to a recent report, Zomato, which is likely to launch its IPO, next month, is expected to file a proposal with the Competition Commission of India (CCI) this week, seeking approval for the investment.

Details about the funding

In the existing round, Zomato will invest about $100 million in the SoftBank-supported online grocery firm, while existing investor Tiger Global will fill in the rest. New York-based Tiger is an investor in both companies, while SoftBank Vision Fund owns about 50% of Grofers.

The development comes as Zomato’s rival Swiggy is aggressively pushing daily essentials delivery through Super Daily and quick grocery delivery service Instamart. According to a latest report, SoftBank Vision Fund is close to deploying $450 million in Swiggy, largely to help it expand beyond food delivery.

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Grofers and its investors

Grofers co-founder Saurabh Kumar announced on June 18, 2021 that he will be parting ways with the startup, eight years after building it with founder and CEO Albinder Dhindsa. Though he is giving up his operational roles in the company, he will remain a shareholder on the board.

He and Albinder together own less than 8% in a startup, with the majority currently held by Softbank. Other investors include Tiger Global, Sequoia Capital, and DST Global.  Sequoia is also an early investor in Zomato.

Grofers’ vision

As per a spokesperson from Grofers, their vision is that, “We don’t comment on speculation. Our focus at present is to do our best to serve consumers at this time of the country’s need; while we continue to build technology that empowers the grocery ecosystem to make products more affordable and accessible for millions of Indian households.”

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Relation between Zomato and Grofers

Zomato and Grofers have mostly tried to forge a deal. Last year, they were in talks for an all-stock merger that fell through. They started talking again this year, at a time when the online grocery space is seeing a lot of growth as Zomato came forward and have invested heavily.

While Zomato has been focused on the food delivery segment, its competitor Swiggy is betting big on its hyper local delivery service Swiggy Genie, where it competes with Dunzo, Flipkart. Amazon and its online grocery service Swiggy Instamart, where it’s up against players such as Flipkart, Amazon, BigBasket, JioMart, and Grofers.

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About Grofers

Grofers was founded back in 2014 by Dhindsa and SK- as he is known by company insiders and friends and was among a bunch of hyper local start-up at the time. Grofers and Tata-owned BigBasket are the largest players in the space currently, with Swiggy’s Instamart, Flipkart, and Amazon.

Albinder & Zomato founder and CEO Deepinder Goyal also have a bond back from the start-up days. Both of them studied at IIT-Delhi between the years 2000-2005. He also headed Zomato’s international operations for two years before starting up Grofers.

Albinder’s wife Aakriti Chopra, one of Zomato’s early employees who currently work as Chief People Officer, was recently elevated as co-founder, in recognition of her contributions to the company.

For the financial year 2019-20, Grofers posted a net loss of Rs 637 crore compared to Rs 448 crore in the previous year. Its revenue for the same period grew to Rs 177 crore compared to Rs 84 crore in the previous year.

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IPO-bound Zomato awaits Sebi’s approval

Zomato sealed its investment in the online grocery platform, even as it awaits market regulator’s Sebi’s approval for its IPO. It had filed for its, Draft Red Herring Prospectus (DRHP) in late April, pulling off one of India’s most anticipated internet initial public offerings (IPOs) this year.

Sources said Sebi is likely to issue its final observations in the draft offer document in the coming few months, a prerequisite for any company seeking to offer its shares to the public.