Online food delivery platform Zomato and e-grocery startup Grofers are in early stage negotiations for a possible merger, according to four people familiar with the matter. If the deal goes through, it will boost Zomato’s position against its arch rival Swiggy, which is verticaling its grocery deliveries.
“Negotiations are at the company and founder level for now,” one person quoted above requested anonymity. “If they become more solid, it will move to the board level.”
Sources said that talks have been going on for about a month, but due to the current Kovid-19 crisis, the back seat has been found. To ensure this, negotiations will continue at an early stage and the deal may not happen.
Investors in both companies are also aware of the negotiations, but the deal will present a number of challenges because of Alibaba, a common investor in Zomato and BigBasket. “Apart from Alibaba, it will not be easy for the Groffers to convince their investors, including Softbank and Tiger Global, either,” the person above said.
The development comes at a time when online grocery players such as Big Basket and Growers have seen a tremendous jump in orders due to the Kovid-19-inspired nationwide lockdown. The lockdown caused a significant decline in online food delivery orders.
E-grocery has become so popular that at least more than 10 startups including Meisho, BharatPay and Box 8 have recently stepped into the space. Even Swiggy has steadily increased its grocery presence in 125 cities. Zomato, too, recently launched its grocery delivery service – Zomato Market.
“Grofers are helping Zomato with grom deliveries,” said another person familiar with the matter, requesting alimony. “This partnership could potentially move forward.”
Grofers CEO Albinder Dhindsa refused to comment on the story. A Zomato spokesman said though. “We have partnered with growers with various FMCG companies, local grocery stores and modern retail chains to operate our grocery delivery service. We do not know of any other interactions with the growers.
A possible merger between the two companies has also been negotiated a few days after Alibaba led a $ 50 million round in BigBacket. Entrackr The development was particularly reported earlier this month.
Investors in the space, however, are skeptical about the deal with Zomato and the Grofers.
“Zomato and Big Basket have Alibaba as a common investor,” said a venture capitalist at a top firm, requesting alimony. “It does not combine Grofers and Zomato to merge.”
In fact, both Grofers and Big Basket have had several merger discussions in the past, but none of them materialized.
“It is not a secret that Alibaba is not happy with the performance of Big Basket. In fact, the Growers came forward to talk about the merger, but Alibaba supported,” added a third source. He also remained anonymous. the requested.
Although the talks are at a preliminary stage, Softbank and Alibaba will join hands with Paytm for the second time in India if the deal comes through. Alibaba invested in Paytm in 2014, while SoftBank joined the Vijay Shekhar Sharma-led venture in 2017.