TOKYO/MUMBAI -- SoftBank Vision Fund led a $220 million investment in Indian online grocery company Grofers, in a sign of its growing ambitions in India.
The funding round raised the Gurgaon-based company’s valuation to $770 million, according to a person familiar with the matter. With the investment, SoftBank will now hold a stake of over 40% in the startup, the person said.
SoftBank Group invested around $60 million in Grofers last year and later sold its stake to the Vision Fund. In December, Grofers closed a $200 million round at a $450 million valuation from investors that did not involve the Vision Fund. South Korea's KTB, and existing investors Tiger Global Management and Sequoia Capital participated in this series F round.
“This is the largest primary injection in a grocery business in India,” Grofers CEO Albinder Dhindsa told the Nikkei Asian Review.
The rapid pace of fundraising underscores the need to expand, especially around profitable centers such as New Delhi and Kolkata in the east, as well as scaling up current capacities, Dhindsa said. The startup, which launched its own branded products last year, will double its merchant network to 10,000 by the end of the year.
Grofers, set up around six years ago, is in the midst of what is shaping up to be one of the world’s fiercest e-commerce battles. Attracted by a fast-growing population and a rising middle class, foreign investment is pouring into India’s nascent online grocery sector.
The online food and grocery business in India reached nearly $1 billion in 2017 and analysts at RedSeer Consulting expect it to hit $5 billion by 2020 at a compound annual growth rate of 72%. The segment will likely be a key driver for the whole online retail industry, which consultancy CRISIL expects to grow 2.5 times to $28 billion by 2020.
Earlier this month, Grofers’ biggest rival Alibaba Group Holding-backed BigBasket, raised $150 million and became a unicorn. Both these grocery players have to face Amazon and Walmart, which has invested around $16 billion in Flipkart.
However, the heightened competition has not fazed Dhindsa as he said Grofers offered customers a different service.
“We are focusing on building ourselves. Our estimate is that we are either the same size as BigBasket or bigger now and we have done that with half the capital they have spent. And ours is a very different kind of market strategy,” Dhindsa said.
The company is on course to turn a profit by 2021.