The Competition Commission of India (CCI) has approved food delivery major Zomato Ltd’s $100-million investment in Grofers India Pvt. Ltd and its wholesale entity Hands on Trades Pvt. Ltd, the market watchdog said on Friday.
“Commission approves proposed acquisition by Zomato of approximately 9.3% stake in Grofers India and Hands on Trades,” the CCI said in a Twitter post.
In the first week of July, Zomato had sought approval from the CCI to acquire a 9.3% stake, each, in the online grocer and its wholesale subsidiary, after the companies signed an agreement on 29 June. As a part of the transaction, New York-based existing investor Tiger Global was expected to pump in another $20 million, according to media reports.
Mint had reported that the deal was expected to value Grofers at a shade over $1 billion, making it the most recent entrant to India’s unicorn club.
Earlier this month, Zomato said it will restart grocery delivery services on its app, after suspending the services in July 2020. The startup started delivering essentials and groceries under the Zomato Market offering following a surge in demand during the first wave of the pandemic and the ensuing nationwide lockdown.
“Grocery is a large opportunity, and it is in a nascent stage but growing rapidly. We think our platform lends itself well to us doing more than what we do today. So, I think we are actively experimenting in the (grocery) space, and recently invested $100 million for a minority stake in Grofers, with the idea of getting more exposure to that space and building our own strategies,” Zomato’s chief financial officer Akshant Goyal had said in July. The company was looking at e-grocery from a purely “experimental” mindset, he added.
Food delivery platforms and large conglomerates, including Reliance Industries Ltd (RIL) and the Tata group, are eyeing a share of India’s growing e-grocery market. For instance, Zomato’s arch-rival Swiggy is ramping up its essentials and grocery delivery business, Instamart, in Bengaluru and Gurugram after launching the service last year. The Bengaluru-based foodtech company had raised $1.25 billion in July from global investors including SoftBank and Prosus, at a valuation of $5.5 billion.
At the company’s 44th annual general meeting in June, RIL chairman Mukesh Ambani said JioMart had registered a peak of more than 650,000 orders on a single day, and 80% in repeat orders within one year of its launch in May 2020. Likewise, earlier this year, Tata Sons bought a 64% stake in India’s largest e-grocer, BigBasket. Mint had reported that the Tatas had shelled out over $1 billion for the acquisition.
Source: Mint