BigBasket and Grofers, which are among the leading startups in the online grocery delivery space, are reportedly in talks regarding merging their businesses.
As per people aware of the development, if the deal goes through, SoftBank Group — an existing investor in Grofers, will participate in a $60-100 million funding round in the merged entity.
A report from LiveMint suggests that BigBasket is hoping for a valuation of at least $700-800 million, while Grofers could be valued at $150-200 million. A person aware of the matter, said,
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 news about merger between leading grocery delivery startups comes at a time when Flipkart is said to be involved in advance talks for the acquisition of Snapdeal. Interestingly, SoftBank is the one pushing for the sale of Snapdeal, and is also said to invest more in Flipkart if the deal goes through. The investment is going to come in the form of a buy-out of a portion of Tiger Global Management’s existing stake in Flipkart.
But, why a merger? Simply put, because BigBasket is in dire need of fresh money. For this, it held talks with investors such as Wal-Mart Stores Inc, Amazon.com Inc, Tencent Holdings Ltd, and Fosun International Ltd. However, nothing has materialized so far.
While BigBasket is running out of cash having a burn rate of around $6 million, Grofers is sitting still with $50-60 million in bank balance, with a burn rate of around $2 million a month.
Commenting on this, Alibinder Dhindsa, founder and chief executive of Grofers, said,
The team at Grofers is focused on executing on our long-term strategy and 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.
BigBasket has so far raised more than $220 million in funding from investors including Abraaj Group, Bessemer Venture Partners, Sands Capital and International Finance Corp. In March last year, it raised $150 million at a valuation of about $450-500 million. Last month, the company raised $45 million in Series E funding round.
Grofers, on the other hand, has so far raised $165 million from Tiger Global Management and SoftBank, among others. It started out as a hyperlocal grocery delivery start-up in December 2013, but is now moving away from this model. It is now focusing on an inventory model and has also launched high-margin private brands.
BigBasket posted a loss of Rs 278 crore on revenue of Rs 580 crore in the year ended 31 March 2016, while Grofers posted a loss of Rs 225 crore on revenue of Rs 14.3 crore the same year.
