Unicorn in the making: Zomato money to take Grofers’ valuation over $1 billion

IPO-bound Zomato is all set to invest $100 million in online grocer Grofers and pick a 10 per cent stake in the startup. Tiger Global will also put in around $20 million in the company. The funding will value the startup a little over $1 billion, putting it in the same league as members of swiftly-growing unicorn club.

Zomato that is aiming for its initial public offering next month will file a proposal with the Competition Commission of India (CCI) this week seeking approval for the Grofers investment. Tiger Global is an investor in both Zomato and Grofers.

This move comes amid a sharp rise in online grocery delivery in the past year. The surge has come at the back of the lockdowns imposed by several states to curb the spread of coronavirus. As sales increase, the online grocery market continues to attract big names for investments. Grofers’ rival BigBasket recently sold its majority stake to Tata Group. Reliance Industries also launched JioMart in the last year.

Meanwhile, Zomato’s rival Swiggy too has jumped on the daily essentials delivery bandwagon through Supr Daily and Instamart. SoftBank Vision Fund is planning to deploy $450 million in Swiggy in order to help it expand beyond food delivery. SoftBank is also the largest investor in Grofers, with 50 per cent stake. Moreover, Zomato had acquired Uber’s Indian food delivery business last year.

The online grocery delivery market could be worth $12 billion in India by 2023, a Bank of America report stated. “Competition is high in the sector with large verticals like BigBasket/Grofers and horizontal like Amazon/Flipkart trying to convert the unorganised market to an organised one. Until recently the No. 1 player in the space was BigBasket, with it hitting $1 billion annualised GMV and selling over 300,000 orders every day,” they said.

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