Embattled online grocery startup Grofers has raised Rs 400 crore (approximately $62 million) in a fresh round of funding that was led by Japanese investment giant SoftBank. Apart from SoftBank (an existing investor), another existing investor Tiger Global and a new investor Yuri Milner (Russian billionaire) also participated in the round. Both SoftBank and Grofers have officially confirmed the news reports of fund-raising.
However, Grofers had to take a substantial haircut in its valuation for raising the funds. The Gurgaon based startup has raised the latest funds at a valuation of $300 million, taking 20% reduction from its earlier valuation when it raised funds from SoftBank in November 2015.
Today’s fundraising round follows slew of media reports that claimed Grofers is really desperate to raise new funds. The startup’s desperation is understandable given that its declining profits and revenues had relatively made it difficult to raise fresh funds. Besides, its bigger rival BigBasket had very recently raised funds from Alibaba and other investors at much higher valuation.
Grofers eagerness to raise fresh funds also stems from increasing competition from giants like Amazon and Flipkart. Both online shopping giants are planning to make huge investments in online grocery business in a bid to take a bigger pie of the grocery market.
Grofers was forced to pull down shutters across nine cities in January 2016, after it failed to gain customer tractions in these regions. It followed this move by going for a massive job cut in order to trim down its losses.
Although latest fund infusion will certainly give a much-needed breather to the company, its road to profitability is apparently still filled with humongous challenges. While intense completion is certainly a challenge, earning profit in an industry were profit margin is wafer thin will be equally challenging for Grofers.