India’s largest online grocery player BigBasket is looking at a possible merger with its rival Grofers, according to a Mint report. If the talks go through, SoftBank may participate in a $60-100 million funding round with the merged entity.
BigBasket has been scouting for a fresh round of funds and has been talking to investors such as Wal-Mart Stores Inc, Amazon, Tencent Holdings and Fosun International, according to the report. However, talks haven’t materialized yet.
BigBasket last raised funds in March 2016. It raised $150 million from a group of investors at a valuation of nearly $450-500 million. In total, it has so far raised around $220 million from various investors including Abraaj Group, Bessemer Venture Partners, Sands Capital and International Finance.
While BigBasket did not respond to Mint, Alibinder Dhindsa, founder and chief executive of Grofers told Mint that Grofers is focused on executing its long-term strategy. “We are well capitalized for that with an investor set that supports the vision. We don’t need to make any strategic moves at this time,” he added.
Grofers, unlike BigBasket is not in need of funds. It has about $50-60 million cash in bank. Sources told Mint that BigBasket currently incurs a cash burn of about $6 million per month. And as it rapidly runs out of cash, it is keen on bringing SoftBank on board. On the other hand, Grofers incurs a cash burn of only $2 million a month approximately.
Grofers has so far raised $165 million from Tiger Global Management, SoftBank and other investors. After raising $120 million in October 2015, Grofers was valued at $350-400 million
“The talks are in early stages, but there is definitely interest from both parties. If the deal happens, SoftBank will invest in the merged entity but a lot hinges on the valuation. The stakeholders are yet to agree on a valuation,” the source told Mint.
BigBasket has been the early mover in the online grocery space and so far the most successful one. It now even has its own brands such as Fresho, Royal, Tasties and HappyChef.
Grofers too, has been slowly revamping its business after the hyperlocal model didn’t work well for it. Grofers too, now has its own high-margin private brands Freshbury and Best Value.
Mint reports that as per research firm Tofler, BigBasket posted a loss of Rs 278 crore on revenue of Rs 580 crore in FY16, while Grofers posted a loss of Rs 225 crore on revenue of Rs 14.3 crore the same year.