Zomato eyes grocery market with Grofers' part-acquisition, confirms company

Zomato will soon launch a grocery section on its app, the company said on July 8. It confirmed its $100 million investment in SoftBank-backed online grocery firm Grofers while announcing its IPO. The conversation for a possible partnership has occurred in April 2020 post the first covid-lockdown. Due to the COVID-19 lockdown, there has been a tremendous demand for online grocery players such as Big Basket and Grofers.

Further, there had been a significant drop in online food delivery orders. E-grocery has become so popular that at least more than 10 startups including Meesho, BharatPe and Box8 forayed into space. Even Zomato (and Swiggy) had entered the essential grocery delivery market in 2020. The Deepinder Goyal-led company has also forayed into the dietary food segment, also called nutraceuticals. Zomato's HyperPure initiative also already caters to fresh and high-quality supplies like vegetables, fruits, groceries and spices, to restaurants. Thus, this strategic investment in Grofers solidifies Zomato's position in the overall food segment.

About Zomato IPO

Zomato IPO opens on July 14 and will close by July 16. The bulk of this will be new shares priced at ₹72 to ₹76 each. Kotak Mahindra Capital, Morgan Stanley India, Credit Suisse Securities, BofA Securities and Citigroup Global are managing the sale. The IPO will be a boon for Ant Group. The reason – it made early investments in two companies going for IPO this year – Zomato and Paytm.

Info Edge, one of Zomato’s early investors, will sell its shares worth Rs 375 crore through the IPO, the number was rs 750 crores when Zomato filed its DHRP. Zomato also stated that it will offer Info Edge to nominate one non-executive nominee director, liable to retire by rotation, on the Board till their respective shareholding is >7.5% of the shares of the company. Info Edge currently owns around 18.5% of the company, a stake worth Rs 7,270 crore.

The company, in its DHRP, said that it would use 75% of the IPO money to fund organic and inorganic growth initiatives for five years. The IPO fund use will span out in customer acquisition, delivery and technology infrastructure, potential acquisitions and strategic initiatives.