A hyperlocal grocery delivery merger on the cards; Bigbasket and Grofers

Bigbasket and Grofers, two of the largest hyperlocal online delivery startups in the industry, are possibly in talks of a merger. Bigbasket is by far the best-funded online grocery store and is hoping for a valuation of $700-800 million, while Grofers is valuing itself at $150-200 million. Both combined are hoping to create a unicorn with more than $1 billion valuation offering economy of scale and cost savings. Softbank, which is a major investor in Grofers, is also expected to put in $60-100 million of capital in the merged entity if the deal goes through.

Bigbasket, the bigger brother, is facing a difficult time with uncertain capital raising environment, depleting cash reserves, and a mammoth $6 million per month of cash burn from its operations. It is a somber site compared to $60 million cash reserves of Grofers and $2 million per month of cash burn. One of the insiders commented that “The talks are in early stages, but there is definitely interest from both parties. If the deal happens, SoftBank will invest in the merged entity but a lot hinges on the valuation. The stakeholders are yet to agree on a valuation”.

While both the players started as a delivery startups getting small single digit commission from the merchants, they have evolved their business models into an inventory-led private labels high margin business. Grofers owns private labels such as Freshbury and Best Value, and Fresho, Royal, Tasties and HappyChef comes under BigBasket.