The ecommerce arm of One97 Communications, Paytm Mall, is reportedly in talks to invest in online grocery delivery platforms Grofers and MilkBasket.
Paytm Mall had shut down its warehouses across many cities, last year, as part of its cost-cutting measures as operating warehouses and logistics services are capital intensive. The company had also pulled out of cashback schemes in an attempt to pivot to an asset-light model.
Now that Paytm Mall is looking to enter the hyperlocal delivery market, it is planning to get access to warehousing infrastructure through its investment in the two grocery delivery platforms, the Mint report highlighted citing sources.
The report also added that Paytm Mall is still figuring out the terms of investment with Grofers. Whereas it is looking to lead a funding round for MilkBasket through which it will acquire a sizable stake in the company.
Both Paytm Mall and Milkbasket have declined to comment on the talks. Meanwhile, Grofers too declined to comment on the report, saying that the company is not aware of any such investment by Paytm Mall. The spokesperson also added that the Grofers is on track to be EBITDA (earnings before interest, taxes, depreciation and amortisation) profitable for the month of May.
SoftBank’s Empty Pockets Behind Paytm-Grofers Deal?
Masayoshi Son-led SoftBank, who is an investor of both Grofers and Paytm Mall, is one of the biggest commonality between the two ventures. The Japanese conglomerate’s vision fund had recently reported $17.7 Bn in its financial year 2020, higher than the estimated $16.7 Bn. CEO Son had also clarified that SoftBank would not be providing financial support to rescue the risky companies.
According to an Economic Times report citing sources, since SoftBank does not have fresh capital, therefore, it is looking to push consolidation or investment between the two entities. The report added that the deal may lead up to a merger as well.
SoftBank currently has nearly 20% stake in Paytm Mall, whereas Alibaba has close to 35% stake. The company’s other shareholders are SAIF Partners, eBay and Paytm’s founder and CEO Vijay Shekhar Sharma. Meanwhile, the SoftBank Vision fund owns more than 40% of Grofers’ business.
The Surge In Grocery Delivery And Rising Speculations
With the nationwide lockdown, there has been a surge in demands for hyperlocals and grocery delivery. According to US-based market research company Forrester Research, India’s online grocery market could make $3 Bn in sales this year, representing a whopping 76% hike compared to $1.7 Bn last year.
Meanwhile, the ecommerce segment is expected to grow by 6%, amounting to $35.5 Bn this year. Of this, grocery delivery will be the biggest driver of the overall ecommerce sales with an additional $1.3 Bn, the report added.
With such reports coming in, there has also been a rise in the speculations of potential investments, and M&A coming into the picture. For instance, media reports suggest that food delivery platform Zomato is also in talks to acquire Grofers, whereas BigBasket is said to be in talks with Milkbasket.
Meanwhile, there have been some actual deals as well. For instance, a day before the lockdown was announced, BigBasket had announced acquisition of DailyNinja. The Bengaluru-based company had also raised close to $100 Mn in two transactions from its existing investor Alibaba to tackle the surge in demand.
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Link : https://inc42.com/buzz/paytm-mall-may-invest-in-grocery-delivery-startup-grofers-milkbasket/
Author :- Kritti Bhalla
May 29, 2020 at 11:13AM
Inc42 Media