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Zomato Ltd is set to double down on the online grocery market. The food delivery platform, which went public last week, will lead a 3,500 crore ($470 million) investment in Grofers, which turned unicorn recently, two people directly aware of the development said.

Several global investors will join Zomato in investing in Grofers, the people said, requesting anonymity. Zomato invested $100 million in Grofers about a month ago for a 9.3% stake, valuing the online grocer at more than $1 billion.

“There are new private equity investors who are banking on the growth story of the online grocery delivery business. Alongside, Zomato is keen to strengthen its network in the grocery delivery space for which Grofers can play a vital role," one of the two people said.

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Zomato has already announced its interest in re-entering the grocery delivery market as customers choose to order online rather than visit crowded markets because of the pandemic. It had introduced a grocery delivery service during the nationwide lockdown last year but shut it down later. Rival Swiggy is already offering grocery delivery through its Instamart service.

A Grofers spokesperson said, “We don’t comment on speculation. Our focus at present is to do our best to serve consumers, while we continue to build technology that empowers the grocery ecosystem to make products more affordable and accessible for millions of Indian households."

A query sent to Zomato remained unanswered.

Grofers is also seeing increased interest from global investors amid soaring demand for online deliveries. Japanese billionaire Masayoshi Son’s SoftBank and New York-based Tiger Global hold 51% and 19.2%, respectively, in Grofers.

“The latest stake sale by Grofers will not only help the company expand faster than its rivals, but also help Zomato in gaining a privileged access to Grofers products for speedier delivery of grocery, which is being aspired by Zomato as its next big venture," the person said.

Zomato already provides fresh and high-quality supplies such as vegetables, fruits, groceries and spices to restaurants through an initiative called HyperPure.

The food delivery company, which became the first of India’s unicorns to go public, received bids for more than 40 times the shares on offer. The stock has surged 82% from its IPO price. On Monday, the shares rose 9.56% to 138.05.

Grofers is banking on Zomato’s popularity to augment its existing grocery business.

According to data from PGA Labs—the market intelligence unit of Praxis Global Alliance— Grofers had a 13% market share in fiscal 2021, while market leader BigBasket had a 37% share. The Indian e-grocery market is estimated to touch $22 billion by fiscal 2025.

Competition is intensifying in the online food and grocery delivery space, with large companies such as BigBasket, Grofers, Amazon, Walmart-Flipkart trying to convert the unorganized market into an organized one.

BigBasket recently hit $1 billion in annualized gross merchandise value. The company delivers more than 300,000 orders a day. Billionaire Mukesh Ambani’s Reliance Retail Ltd, too, is betting big on the business by launching its JioMart app across 200 cities.

In a note to clients earlier this year, Bank of America analysts estimated that the online grocery delivery market could be worth $12 billion in India by 2023.

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