Gurugram-based online grocery retail startup Grofers is keen to raise funds to the extent of $60-65 million and the startup is reconciled itself to have its valuation drastically cut by over 40%. It is also learnt that though Grofers is seeking these funds from its existing investors, at least one of them, Sequoia Capital may not be interested in picking up any additional tab.
Japan’s Softbank Group, an existing investor, along with Tiger Global Management are likely to be investing this amount. During the last round of fund-raising, in 2015, the company, Grofers India, had got $120 million and its valuation was pegged at $400 million.
It may be relevant to point out that the company has been making efforts, of late, to convince one of the larger one’s in the same business, BigBasket or Paytm for a possible strategic partnership, but nothing concrete materialized. Grofers then decided to look inward, re-organized its operations, including altering its business model. It is also now focusing on the NCR region. The infusion of these fresh funds will definitely help Grofers improve its status and will save it from a downward slide.
The online grocery has been a tough space to survive in and there were several players such as PepperTap, LocalBanya and GrocShop are cited for explaining how these startups erred in their approach while creating hyper-local infrastructures, but failed and had to shut shop.
The online grocery sector in India is heating up and with majors like Amazon and Paytm jumping into the fray. The competition is stiff and would get tougher in the coming weeks and months. Studies show orders inflow is definitely increasing. The only issue is the margin in the business, which is quite thin and only organizations with deep pockets and the ability to sustain. Currently, the three, BigBasket, Grofers and Amazon, in that order, hold around a third each of the market share with minor differences between them.