
Grofers has raised more than $200 million in fresh capital led by existing backer SoftBank Vision Fund, making it one of the largest investments in the online grocery retailing segment. This is as per a report in the Economic Times.

Venture capital fund Sequoia Capital and Tiger Global also participated in the funding round, while South Korea’s KTB joined in as a new investor.

The latest investment round includes the $60 million that the grocery e-tailer had raised in February. Grofers’ valuation, which was pegged at $500 million after the first tranche came in, is expected to have jumped to $600-$700 million after the latest infusion, sources in the know told ET.

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 the Alibaba-backed BigBasket, among others. Closest rival BigBasket said earlier this month that it had closed a $150 million financing round led by South Korea-based Mirae-Naver and China’s Alibaba Group, valuing the startup at over $1 billion.
It was first reported around October 2018, about the fund raising, specifying that the Japanese group was moving Grofers to its $100 billion SoftBank Vision Fund.
Grofers, founded by IITians Saurabh Kumar and Albinder Dhindsa, said it clocked annual revenues of $400 million after pruning its business and focusing on a few core markets and categories.
In the past year or so, it has pivoted its model away from being an on-demand, hyperlocal grocery delivery player to a full-stack platform targeting value-conscious customers.
“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, the CEO.
The company is concentrating on select clusters within cities where such a segment can be catered to. About half a million customers have subscribed to its 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 by end of this year.
The fresh capital gives Grofers additional firepower to fight top ecommerce companies including BigBasket, Flipkart and Amazon, all of which are aggressively scaling up their grocery businesses.
Flipkart and Amazon have launched their own private labels, and steered away from fresh foods due 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 regard 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 has targeted operational break-even by year end.
For financial year 2018, revenue stood at Rs 557 crore, it said, on a loss of Rs 260 crore. In comparison, BigBasket’s revenues for the same period was Rs 1,605 crore on a loss of Rs 310 crore, regulatory filings show.