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Grofers mulls indirect listing in US via SPAC route

Grofers had 12,000 store partners at the end of 2020 compared to 7,000 before the covid outbreakPremium
Grofers had 12,000 store partners at the end of 2020 compared to 7,000 before the covid outbreak

  • An advisor has been appointed and the talks have passed the early stage. If Grofers merges with a SPAC entity, already listed in US, it gets fresh liquidity, said a person familiar with the development
  • Grofers has also been through a few failed acquisition and funding talks with Zomato and Paytm Mall

Bengaluru/Mumbai: E-grocer Grofers is in talks for an indirect listing in US by merging with a special purpose acquisition company (SPAC), said three people familiar with the development.

SPACs are blank check companies listed on a US stock exchange which either acquire or merge with companies.

“An advisor has been appointed and the talks have passed the early stage. However, it’s far from reaching a final decision. If Grofers merges with a SPAC entity, already listed in US, it gets fresh liquidity," said the first person, asking not to be named.

Bloomberg first reported this on Thursday evening.

Grofers had earlier said it is eyeing a public listing later this year.

“We don’t comment on market speculation," said a Grofers spokesperson.

"About $70 billion has been raised in SPACs and that would likely result in M&A activity of at least five times of that amount. Several Indian companies too are exploring this route for listing on US exchanges," said a Mumbai-based investment banker.

Softbank-backed Grofers’ net loss swelled 42% to 637.4 crore in 2019-20 from 448 crore the previous year, even as its revenue more than doubled to 176.7 crore. (In 2018-19, Grofers had reported revenue of 83.6 crore.)

Grofers, which was earlier looking at overall profitability by 2020, now aims to achieve it in 2021.

“Given the profitability and other financial metrics to list in India, a domestic listing would not be easy for Grofers. That said, it is not easy for an Indian firm to list through the SPAC route due to many tax compliances," said the third person.

Grofers has also been through a few failed acquisition and funding talks with food delivery firm Zomato and e-commerce firm Paytm Mall.

Last April, Zomato and Grofers held early-stage talks for a potential merger, as the food tech firm was eyeing at India's growing e-grocery pie. However, the talks failed due to the ongoing pandemic and the Grofers’ reluctancy towards the acquisition.

Grofers had denied the acquisition talks then.

In May, Paytm Mall was also in talks with Grofers and MilkBasket for a strategic investment, as it looked to double down on the e-grocery market.

"Grofers has been in the market to raise funds for a long time, without any success. It has held talks with some players for a potential investment, however even those have not worked. It is now under pressure from investors, which are reluctant to put any follow-on investments, and the Tata-BigBasket deal is not helping its cause in any way. It has to give an exit," said the second person.

Grofers has been significantly focusing on its private label business over the past few years, which currently forms almost 42% of its revenue. In a recent interview, Grofers co-founder and CEO Albinder Dhindsa said that that it will invest $15 million in its private label business, as it looks to make supply chain related acquisitions before its proposed IPO.

The company is also looking to introduce its private labels in new segments such as hygiene, personal care, home equipment, crockery and kitchenware.

Grofers had 12,000 store partners at the end of 2020 compared to 7,000 before the covid outbreak. Local store partners help Grofers in delivering goods. It also added 10,000 sq. ft of warehousing space during the year.

Tarush Bhalla contributed to the story.

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