Speculation is that Zomato is poised for a significant financing round that may boost the Gurugram-based online grocery company at around $1 billion, and here is the reason why.
- Zomato is reportedly in conversation to invest $300 million in grocery delivery startup Grofers, an organization it once intended to acquire.
- The $5.4 billion food delivery giant is looking at gaining a significant part of the online grocery space.
- Zomato had recently reported its $1.1 billion first sale of stock arrangement, in which it had referenced that it has kept the entryway open for future ventures.
IPO-bound food tech unicorn Zomato had a brief stretch in staple retail in 2020. However, it appears that Founder and CEO Deepinder Goyal eyes bigger opportunity in the sector. As indicated by a recent report, Zomato is in talks to invest $300 million in grocery startup Grofers, an organization it once intended to buy.
Recently, Zomato also reported its first sale of stock offering plan worth $1.1 billion. In its Draft Red Herring Prospectus (DRHP), the Zomato said that the company would continue to look for attractive inorganic opportunities that seem to fit with the organization’s strategic business objectives and growth.
Blueprint for Future Growth Strategy?
Zomato anticipates a rebound in the essential food item area through an auxiliary, rather than betting everything of its own. Also, it bodes well, as the margins in the grocery area are low. Meanwhile, groceries in India have been distributed mainly through mom-and-pop-and-mortar stores or Kirana stores. Significantly, the overall supply chain margin ranges from 14-20 percent, of which the distributor books 4-6 percent, and the retailer makes for 8-14 percent. Also, considering the razor-thin margins, the potential for any profitable operations for an aggregator is relatively low.
Nonetheless, the $5.4 billion organization is undoubtedly a major stakeholder of the staple food delivery space. During the Covid-19 pandemic, Zomato had reported that it would allow its customers to place orders for food supplies through its mobile phone application.
Zomato’s Long-term Goal with Investments like Grofers
As per Chief Operating Officer Mohit Sardana, delivery of groceries has always been on the company’s long-term goals. This is mainly because it rightly fits into the vision of the company — better food for more people. That the pandemic gave it the right push to spring into action and serve is another story. Now with investments like Grofers, Zomato looks to be on a two-pronged strategy towards online grocery space dominance.
Between April to September 2020, Zomato conveyed 1.1 million entire food item orders, comprising 7.8 million items. Furthermore, Zomato also maintains a business-to-business auxiliary organization called Hyperpure. It supplies products like vegetables and natural products, poultry, groceries, meats, fish, seafood, dairy, refreshments, and also eco-friendly materials for packaging to cafés and restaurants.