Grofers in talks to raise up to $65 mn from existing investors
BENGALURU: Online grocer Grofers is in talks to raise $60-65 million from existing investors in a funding round that could see the valuation of the Gurugrambased start-up drop by over 40%, two people close to the development said.
The round is being led by existing investor Japan’s Softbank Group with participation from Tiger Global Management, the people cited above said. Early investor Sequoia Capital is not likely to participate in the current round, said the two people on condition of anonymity.
Grofers, run by Grofers India Pvt. Ltd, last raised $120 million at a valuation of about $400 million in November 2015.
Softbank declined to comment. Grofers did not respond to Mint’s email queries.
If the round is finalised, it will dispel doubts about whether Grofers can survive, at least for the next year or so. Over the past year, Grofers has explored sale talks with bigger rival BigBasket as well as Paytm, a third person familiar with the matter said.
Neither of the proposed deals materialised. On the business side, Grofers shut operations in several cities, changed its business model and put its focus on winning in Delhi-NCR by investing in improving its supply chain and technology.
The proposed fund raise by Grofers will give the company much-needed capital to try and sustain its fledgling turnaround and avoid the fate that many of its rivals met over the past 18 months. Despite an investment rush into hyperlocal start-ups in early 2015, many of these companies failed to expand significantly and prove that they could build sustainable businesses. Some such as PepperTap and GrocShop shut shop due to paucity of capital in a sector that offers wafer-thin margins.
Of late, the online grocery sector has become intensely competitive again with e-commerce firms such as Amazon and Flipkart expanding their grocery businesses. Big Basket, the largest e-grocer in the country, has also built a war chest to fight competition. reported on February 15.
Spokespersons for TPG, PremjiInvest and Carlyle declined to comment, while emails sent to KKR and Shriram Group did not elicit any response.
If a deal materialises, it would be the first exit for a global private equity fund from an asset that has turned around after restructuring.
The Vishal Mega Mart website claims the company operates over 204 stores in over 110 cities and towns.
In 2011, the company promoted by Ram Chandra Agrawal had run up a debt of ₹760 crore with lenders such as HDFC Bank, HSBC, ING Vysya Bank and State Bank of India. It was acquired by TPG and Shriram Group for a total of ₹70 crore.
According to a Crisil Ratings February 2017 report, TPG Capital had infused ₹669 crore into VMMPL till March 31, 2016. It injected an additional ₹100 crore in fiscal 2017.
Debt levels, though reducing, remained high at ₹324 crore (₹528 crore, including compulsory convertible debentures) as on March 31, 2016, it added.
For fiscal 2016, VMMPL reported a loss of ₹36.2 crore on revenue of ₹1,346 crore, against a net loss of ₹60.3 crore on a revenue of ₹1,108 crore for the previous year.
“The main concern for global PE funds is to find the right domestic partner to meet the regulatory requirements and all the foreign funds are in discussions with local retail companies to form consortiums,” said the second person on condition of anonymity.