INDIA – SoftBank is leading a Rs 400-crore (US$61.6 million) financing round in online grocery startup Grofers, taking its shareholding up to as much as 35-40% in the four-year-old company.
Tiger Global, the New York-based fund which is also an existing investor, has participated in the fund-raise along with Russian tech billionaire Yuri Milner.
SoftBank and Grofers confirmed the development to TOI.
This is the first financing round for the company after it raised $120 million at the end of 2015, when on-demand delivery as a category saw a slug of money come in.
Grofers’ valuation has dropped 20% to $300 million after the investment compared to what it fetched in its previous funding more than two years back, it is learnt.
While SoftBank Group International put in $40 million, Tiger Global — which holds around 25% in the e-grocer — invested $15 million, with the rest coming in from Milner.
Sequoia Capital, the first institutional investor in the Gurgaon-based startup, did not participate in the latest funding.
All told, the on-demand grocery e-tailer had mopped up $160 million before the latest raise.
“The business is in a much healthier place and almost 10 times the size it was in November 2015 when we last raised capital.
We took a lot of hard decisions to fix parts of the business that were not scaling well and our efforts have clearly contributed in making sure we have a clear path to profitability as well as the largest market share in the online grocery segment,” Grofers co-founder & CEO Albinder Dhindsa told TOI in an exclusive chat.
He said Grofers had turned profitable in Delhi on a per-order basis, after having gone through a tough few years.
TOI first reported in its January 23 edition that Grofers had held talks with SoftBank for a new funding in a down round.
A down round is when a company raises capital at a lower valuation compared to its previous fund-raise.
While there have been adjustments and execution missteps along the way, the business progressed and scaled very well over the last 30 months, Dhindsa said.
He co-founded Grofers with Saurabh Kumar in 2013. Grofers moved from a hyperlocal express delivery model to one which runs of scheduled deliveries in 2016.
Online grocery as a segment, was largely dominated by the vertical players like BigBasket till 2015-16 but is now an out-and-out battle between Alibaba, Amazon and Flipkart, which is close to bringing in Walmart as its majority shareholder.
Recently, China’s Alibaba picked up a substantial stake in Big Basket, with a $300 million investment, a mix of primary and secondary capital.
Dhindsa said for now Grofers was staying independent. TOI had last year reported on it exploring raising strategic capital from Amazon . Grofers was also in talks for a possible merger with Big Basket last year, which ended prematurely . For us, the number one priority is to keep growing in our target group while making sure we are moving more markets towards profitability.
“If horizontal players saw that their core markets were providing enough value they would not be looking at expanding into a specialist category with operational complexity.
A player like Amazon still doesn’t have a coherent grocery strategy in the US market where they have been operating for almost 25 years,” Dhindsa said.