Investors loosen purse strings for food delivery firms despite mounting losses

Updated: March 5, 2019 7:03:41 AM

Low-cost online supermarket Grofers raised close to $60 million in funding led by SoftBank Vision Fund, according to documents sourced from paper.vc.

By Asmita Dey 

Large losses notwithstanding, online food delivery and grocery firms continue to mop up funds, having attracted close to $1.5 billion in the last few months.

While Swiggy walked away with a staggering $1 billion in December 2018, BigBasket is expected to close a transaction of around $150 million soon.
Zomato confirmed on Monday it had raised a total $105 million from investors led by Germany-based Delivery Hero and US-based Glade Brook Capital.

Documents sourced from business signals platform paper.vc earlier showed that Glade Brook Capital invested close to $40 million in Zomato. The Gurgaon-based firm also raised around $62.5 million led by Delivery Hero.
Saturn Shine and Shunwei Ventures (Mauritius) are other investors who participated in the round.
The investments are part of the company’s series I financing round.
Low-cost online supermarket Grofers raised close to $60 million in funding led by SoftBank Vision Fund, according to documents sourced from paper.vc.

The investment, which is a part of the Gurgaon-based firm’s new series F financing round, also saw participation from existing backers US-based Tiger Global Management and venture capital firm Sequoia Capital. Grofers’ valuation after this round of financing stands at $424.84 million, estimates paper.vc

Reportedly, BigBasket is closing a fresh $150-million investment led by existing investor Alibaba. If the deal goes through, the total funds raised by the online food and grocery players will stand at $315 million so far in 2019.
Online food delivery firms had also raised large rounds of funding in CY2018. In December, Swiggy alone raised $1 billion in fresh funding led by South African internet and media group Naspers that valued the firm at an estimated $3.3 billion. Zomato raised a total $410 million in funding in CY2018 from Ant Financial, an affiliate of China’s Alibaba Group Holding.
Flush with funds, companies operating in the online food and grocery space are expanding into other categories and investing in other businesses. Swiggy has recently invested `31.2 crore in Mumbai-based ready-to-cook food start-up Fingerlix. The Bengaluru-based firm also announced it was going hyperlocal in the grocery segment with the launch of Swiggy Stores. Swiggy will cater to consumers’ daily needs by partnering with offline stores.

Rival Zomato on Friday announced the launch of a first-of-its-kind, 30,000 sq ft Hyperpure warehouse in Bengaluru. The move will enable the company to offer a wide range of fresh and high quality food products to over 2,500 restaurants every day. In August last year, the Gurgaon-based firm acquired Bengaluru-based start-up WOTO and rebranded it as Hyperpure.

Food delivery companies such as Zomato and Swiggy will possibly see higher losses in FY19 compared to FY18 as they seek to scale their delivery business manifold, analysts at Kotak Institutional Equities (KIE) estimate. They said that grocery companies continue to grapple with thin margins nad high last-mile delivery cost.

Accoridng to KIE, Swiggy’s aggregate losses during FY2015-18 was $113 million. Zomato’s losses duirng the period was $146 million. BigBasket and Grofers’ losses for the period stood at $147 million and $74 million, respectively.

Grofers, which narrowed its losses for the year to March 2018 to `258.30 crore from a loss of `268.32 crore posted in FY17, is banking on private labels in the fast moving consumer goods (FMCG) segment to drive its second phase of growth. The company’s strategy is to make cheaper consumer goods available to the masses.

Analysts at KIE added that e-commerce companies will continue to need large-sized funding rounds as their losses show no donward trend.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1GoAir sale: Last day of offer today, book flight tickets for as low as Rs 1,099
2RBI imposes Rs 8 crore fine on 3 banks for non-compliance in Swift operations
3Grant Thornton identifies Rs 13,000 crore worth irregularities in report on IL&FS