Online retailer Paytm Mall has held discussions with e-grocer Grofers and is looking at a possible investment, the Economic Times (ET) has reported. According to sources, Softbank which is a common investor in Paytm Mall and Grofers, initiated the deal talks. 

A person familiar with the development told ET that Softbank, which is devoid of fresh capital, is looking for consolidation and an investment or a merger between Grofers and Paytm Mall. 

Paytm, with $170 million of cash on hand, is in a good position to support a company in the grocery retailing space, which has gained prominence for the e-commerce industry during the nationwide lockdown due to COVID-19, the report says. 

However, sources have indicated that the talks may not materialise as both the companies are not agreeing on the deal terms. SoftBank Vision Fund (SVF) is an investor in Grofers, while SoftBank Group (SBG) has invested in Paytm Mall. 

SBG owns about 20% in Paytm Mall, while Alibaba holds close to 35% stake. SAIF Partners, eBay and Paytm’s founder and CEO Vijay Shekhar Sharma are the other shareholders. 

Sources have also indicated to ET that Paytm Mall has also held talks to invest or acquire milk delivery startup Milkbasket. Paytm Mall is reportedly looking at various options in the online grocery segment. 

Kalaari Capital, Mayfield, Beenext and Unilever Ventures, among others, are investors in Milkbasket. 

While Softbank refused to comment, a spokesperson for Paytm Mall denied the merger talks, the report says. 

Meanwhile, Grofers told ET in an email that they are not aware of any investments by Paytm Mall and do not comment on speculation. 

Reliance JioMart’s entry in the online grocery market, where it went live in over 200 towns across India this week, has led to investors in other vertical players looking to consolidate, the report adds.