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Grofers is back in the Funding Game as SoftBank May lead Fresh Funding

It seems Gurgaon based Grofers ongoing resurgence is heading toward its next phase. The reason for my buoyancy over the online grocery startup is because reports have started doing rounds that its largest investor SoftBank is willing to lead another round of funding. The round may also see participation of other investors.

The latest rumors about fundraising came barely five months after SoftBank along with other investors had pumped $62 Mn in Grofers. That fundraising came after more than two years of long wait and it came with an hefty price as well. The company had to incur 20% reduction in its market valuation to reduce it to $300 Mn.

The erosion in market valuation clearly signifies the ups and downs in Grofers journey that has now culminated into its ongoing resurgence. These ups and downs clearly stand in contrast to comparatively smooth ride enjoyed by BigBasket, which is Grofers main rival and also the clear market leader.

But how did this Gurgaon based company really managed to script this resurgent story. Expectedly, it resorted to lot of cost cutting exercises. The most important cost cutting exercise that it undertook was shutting down operations in 9 cities in January 2016. This was later followed up by downsizing of its product portfolio, with company deciding to pull off the plug on organic goods and perishable foods.

By dramatically lessening its focus on high end products, Grofers certainly wanted to pick up only those battles that were worth fighting. This could only be termed as highly practical decision by the company given that it was completely starved of funds. It turned all its focus on those products that were more popular with the middle class and lower middle class group.

Although Grofers cash burn continues to remain high, the practical decision to sharpen focus on core products has, at least, kept the cash burn under significant control. More importantly, it seems to have helped the company to script a comeback.

While I was unable to access Grofers’ latest regulatory filings to know about company’s profit and revenue numbers, but the revival of investor’s interest surely signifies that company’s balance sheet may be far healthier than it was at one point of time.

However, we will still have to wait for the fundraising to materialize, since only then we will know whether there has been any improvement in Grofers’ market valuation or not.


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