According to documents submitted to the Competition Commission of India (CCI), Zomato will acquire a 9.3% stake in Grofers, an online grocery delivery platform. The latest move by the Gurugram-based restaurant aggregator comes a few months after Tata Digital acquired a majority stake in Grofers’ main competitor, BigBasket. The acquisition was also made in Zomato’s continued efforts to launch its initial public offering (IPO) in India. The deal between Grofers and Zomato may be designed to compete with companies such as BigBasket and Swiggy.
According to documents submitted to CCI, Zomato has sought approval to acquire shares in Grofers and its holding company Grofers International and wholesale trading company Hands on Trades.
“The two parties believe that the above-mentioned potential relevant market/segment market is highly fragmented, and there are multiple participants, including several unorganized participants, who will continue to impose significant competition restrictions. The proposed transaction will not impose any restrictions on India in any way. The competitive landscape of potentially relevant markets will have an impact,” the document said.
Zomato declined to comment on the acquisition, and Grofers did not respond to inquiries about the transaction at the time of writing.
The acquisition will help Zomato enter India’s emerging online grocery delivery market through Grofers. The company did try to enter the market last year and launched a grocery delivery service in more than 80 cities. However, the service shut down only a few months after its launch.
Similar to Zomato, rival Swiggy launched a grocery delivery service in the country last year. It initially cooperated with local retailers for delivery. The company closed the model, but launched a local ultra-local grocery business called Instamart in August.
According to estimates by the consulting firm RedSeer, the gross merchandise value (GMV) of the Indian grocery market is expected to reach US$24 billion (approximately Rs 1,789 billion) by 2025.
The growth potential has attracted Reliance Industries Group to establish its JioMart as a competitive platform. Tata Digital also recently invested in Rs. BigBasket’s 9,500 crore to acquire a majority stake. In addition to traditional players, Amazon and Flipkart are also investing heavily to expand and improve their existing grocery delivery models in the country.
In addition to entering the field of grocery delivery, Zomato is currently busy preparing for an IPO. The company applied for the highest rupee issuance. Rs 8,250 crore in April, currently expected to be approved by the Securities and Exchange Commission of India (SEBI).