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Grofers in talks to raise Rs 650 crore; SoftBank may lead latest funding round

If the deal fructifies, it will mark an over ten-fold increase in valuation and the third round of funding this year for the Gurgaonbased startup.

Updated: Oct 07, 2015, 09.17 AM IST
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If the deal fructifies, it will mark an over ten-fold increase in valuation and the third round of funding this year for the Gurgaonbased startup.
If the deal fructifies, it will mark an over ten-fold increase in valuation and the third round of funding this year for the Gurgaonbased startup.
MUMBAI | BENGALURU: Grofers, a quick-delivery service for groceries and electronics from neighbourhood stores, is in talks with investors including Japan's SoftBank for funding of Rs 650 crore ($100 million), according to two people aware of the development.

A venture capital investor privy to the talks told ET that “the company is looking to close the round at a valuation of between $300 million and $400 million“.

If the deal fructifies, it will mark an over ten-fold increase in valuation and the third round of funding this year for the Gurgaon-based startup. In February, Grofers was valued at $33 million in its first major round quickly followed by another round in April, taking its to total venture funding to $46.5 million.

“It is still relatively early in the process and the deal is the middle of the due diligence process,“ said one of the people quoted above. Grofers, founded in December 2013, has also held talks with Russian billionaire Yuri Milner's DST Global. But SoftBank, whose president is the India-born former Google executive Nikesh Arora, is now in talks to lead the round, sources said.

Grofers cofounder and CEO Albinder Dhindsa declined to comment when contacted by ET. A SoftBank representative said in an email response, “We do not comment on speculation.“ DST Global did not reply to emailed questions.

The new fundraising comes as Grofers -founded by IIT graduates Dhindsa and Saurabh Kumar -gets ready to compete in the so-called hyperlocal delivery space with larger players such as Flipkart, Snapdeal and JustDial besides grocery delivery firms like BigBasket and PepperTap.

SOFTBANK MOST AGGRESSIVE

Over the past year, SoftBank has become the most aggressive investor in Indian startups, backing Snapdeal, Ola, Housing and Oyo with over $1 billion in total funding. SoftBank founder Masayoshi Son pledged last year to invest $10 billion in India over a decade.

Grocery accounts for over 70% of India's total retail market of $350 billion, according to a recent report on the Indian Internet market by IIFL. “Our interactions indicate that the top three brick-and-mortar grocers invested $2-3 billion in the past three years. Despite such investments, the share of organised grocery retailing remains low. This provides a significant opportunity for an online grocer,“ said the report.

This has made it the next big battleground for Indian Internet companies, as large online retailers who have raised billions in funding look to boost their gross merchandise value (GMVs).

“Grocery is an easy category to grow and the business has high repeat orders; ticket sizes are also high. And online retailers need to double their GMV in the next six months so they are looking to go after additional markets which can grow,“ said the venture capital investor mentioned above.

COMPETITION IN HYPERLOCAL GROCERY SERVICE

India's largest online retailer has started piloting its hyperlocal grocery service, Flipkart Nearby, while Snapdeal recently bought a stake in PepperTap by participating in its $36-million round. Paytm, backed by China's Alibaba Holdings, also has a grocery app while Amazon has been experimenting hyperlocal delivery with kirana stores.

Grofers raised $36 million in April this year from venture capital firm Sequoia Capital India, New York-based investment firm Tiger Global Management and Apoletto Asia, the personal investment vehicle of DST Global's Milner.

The deal had increased valuation of Grofers from around $33 million in February to around $115 million.

The startup has used this capital to aggressively expand to over two dozen cities across the country.

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