E-grocer Grofers picks up more than $200M led by SoftBank Vision Fund
Grofers has raised more than $200 million in fresh capital led by existing investor SoftBank Vision Fund, making it one of the largest investments in the domestic online grocery retailing segment.
The $200 million investment round includes the $60 million that the company raised earlier in February. The valuation of Grofers was at around $500 million, post-investment, when the first tranche closed, and is expected to have jumped to $600-700 million, after the latest infusion, sources in the know told ET. The company did not disclose the deal details.
SoftBank’s move to double down on Grofers puts on hold the on-again, off-again merger talks the grocery delivery service has held with players like Alibaba-backed BigBasket among others. Its closest rival BigBasket announced earlier this month that it mopped up a $150 million financing round led by South Korea-based Mirae-Naver and China’s Alibaba Group, valuing the startup at over $1 billion.
ET was the first to report the fundraise in its October 29 edition last year, adding that the Japanese group was moving Grofers to its $100 billion SoftBank Vision Fund.
Founded by IITians Saurabh Kumar and Albinder Dhindsa, Grofers said it clocked annual revenues of $400 million after pruning its business and focussing on a few core markets and categories. In the past year or so the company has pivoted its model from being an on-demand grocery delivery player to a full-stack platform targeting value-conscious customers. Hyperlocal delivery players like Grofers got a slug of capital in a hopped-up funding environment in 2015 but soon realised that on-demand delivery is a money pit.
“We stock about 1,800 products and are replacing the local kirana store. Our target customer is the woman of the house with a family earning Rs 6 lakh per annum,” said Dhindsa, cofounder & CEO of Grofers.
To cater to this audience, the company is concentrating on select clusters within cities where such population resides, for instance, about half a million customers have subscribed to the company’s membership programme and they drive 70% of the startup’s sales. Grofers closed fiscal 2019 with Rs 2,500 crore in sales, and plans to double that number by end of this year.
The fresh funds give Grofers additional firepower to fight top internet companies including BigBasket, Flipkart and Amazon, all of which are aggressively scaling their grocery businesses. Flipkart and Amazon have launched their own private labels, and steered away from fresh foods owing to supply chain complexities while BigBasket is a full-stack grocery wholesaler with a farm-to-fork supply chain for fresh fruits, vegetables, meats, and multiple private label brands.
“Grofers has iterated its way to great success with regards to its technology platform, extensive partner network and efficient supply chain,” said Vikas J. Parekh, partner at SoftBank Investment Advisers. Grofers will spend the bulk of the capital raised in supply chain and warehousing.
In a bid to keep prices low, it has limited the number of products on its platform, introduced private labels, and moved away from same-day delivery. “Private label by revenue contributes as much as 45% for us. We work with about 40 manufacturers to build affordable products, and plan to scale from 750 products to 1,200 by end of the year across both food and non-food,” said Dhindsa.
The company claimed its margins have improved to 9-10%, and targets breaking even operationally by the end of the year. For the fiscal year 2018, Grofers revenue stood at Rs 557 crore, the company said, on a loss of Rs 260 crore. In comparison, its closest rival BigBasket revenues for the same period was Rs 1,605 crore on a loss of Rs 310 crore, regulatory filings show.
Source: ET Tech