Local Banya, the online grocer, is planning to raise $35-40 million by the end of the fiscal.
Local Banya, the online grocer, is planning to raise $35-40 million by the end of the fiscal. This would be over and above its current efforts to raise $15-20 million for which it is in final stages of talks and expects to seal it in the next few months. The company will use the fund to expand in different markets, improve logistics and technology.
“Currently, we are in final stages of talks to raise $15-20 million and we will complete this soon. After that, we plan to raise another $35-40 million by the end of the fiscal,” said Amit Naik, CTO and co-founder of Local Banya. The company had earlier raised funding from Shrem Strategies and Bennett Coleman & Company Limited’s Spring Board and also from real estate developer Karamvir Avant Group.
The bankers appointed to raise capital for the company are Spark Capital and Edelweiss Capital. The grocery e-tailer is now looking to expand its operations to another 20 cities by 2015 end and has chalked out a plan to be present in 240 cities in 2016. Its focus will be more on tier 2 cities.
The e-grocery retailer was launched three years ago in Mumbai. The company as of now covers Pune, Delhi, Gurgaon, Hyderbad and Noida as well. Retail consultants say companies like Local Banya face a lot of challenges and require huge funding, but if they gets supply chain, warehousing, SKUs and quality right, there is immense posibility for these companies to grow.
“This sector does have a lot of challenges and if they manage to get warehousing and supply chain right, there is nothing that would stop them from growing,” said Prashant Agarwal, joint MD at Wazir Advisors, a retail consultancy firm.
The company also has a private label called Food Matters which at present contributes at least 10% to the e-grocer’s revenue and it plans to increase its contribution to 30% in the next year. On an average, the company does 1,500 deliveries. So far, Local Banya has a database of over 1.5 lakh users and cart size is Rs 1,500 on an average.
“This concept is more likely to pick up in urban areas where time is an issue, but e-grocery retailing will definitely face challenges in tier 2 and tier 3 cities. The biggest challenges that these companies will face is with logistics, warehousing and quality,” said Ashesh Jani, partner at Deloitte Haskins & Sells.
The company recently started instant delivery services in Hyderabad, Navi Mumbai, Thane and Gurgaon. Also, Local Banya has tied up with Metro Cash and Carry, Booker and Hypercity and it plans to tie up with other brick and mortar retailers. Local Banya currently faces competition from Big Basket, Grofers and ZopNow.