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BigBasket and Grofers may have started discussing a potential merger

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In what could have the potential to breath fresh life into the stumbling grocery sector in the country, two of the largest online grocers in the country, BigBasket and Grofers India Pvt. Ltd, could be ruminating over a merger. As per various sources, the two rivals may have even initiated talks in the direction. The merger could well have a huge impact on the online grocery landscape in the country and may see a $50-$100 million funding round led by Softbank.

It should be remembered that Softbank is an existing investor in Grofers and as such, it might be more willing to come on-board as an investor in a merged entity. And investment is the need of the hour for BigBasket, which has reportedly been burning as much as $6 million every month. That kind of cash burn is not easy to sustain and you need a really deep pocketed sponsor to sustain it. While Grofers has Softbank, BigBasket has reportedly attempted and failed to get names like Wal-Mart, Amazon.com Inc, Tencent Holdings Ltd, and Fosun International Ltd on-board.

That is not to say that BigBasket hasn’t raised any funds yet. The company has received at least $220 million in funds from a clutch of investors including the likes of Abraaj Group, Bessemer Venture Partners, Sands Capital and International Finance Corp. It’s last fund raise came at a valuation of half a billion dollars and netted it $150 million. However, the company has been burning out cash in huge quantities without any immediate succor in sight. As such, it needs the backing of a substantial name and what better choice, than Softbank. For that to happen though, a merger would first need to take place.

Livemint cites people familiar with the matter, who 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.

Together, the companies could see their valuation reaching the neighborhood of $1 Billion. However, there has been no official word on whether something like this is even being considered. Funding and a merger could allow the companies to further consolidate their businesses for if there is one thing that Indian online grocers have learned over the time spent in chasing profitability – it is the danger of expanding in too many directions, too fast.

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