Paytm Mall in talks for Grofers stake as SoftBank pushes for consolidation

Online retailer Paytm Mall has held talks with e-grocer Grofers for a potential investment, multiple people in the know told ET, adding that the ongoing discussions may even lead to a merger.

Bengaluru | Mumbai: Online retailer Paytm Mall has held talks with e-grocer Grofers for a potential investment, multiple people in the know told ET, adding that the ongoing discussions may even lead to a merger. Japanese conglomerate SoftBank, a common investor in Paytm Mall and Grofers, initiated the deal talks, sources said. “SoftBank does not have any fresh capital, so it is looking to push consolidation and an investment or a merger between Grofers and Paytm Mall is something that will work,” said a person aware of the development.

Paytm Mall, which has about $170 million of cash on hand, is well poised to back a company in the grocery retailing space, which has emerged as a bright spot for the ecommerce industry during the Covid-19 outbreak induced nationwide lockdown. For SoftBank, the push to bring the companies together is largely aimed at helping Grofers access that cash to deepen its runway, a person in the know said.

“SoftBank wants Grofers to get their (Paytm Mall) cash or absorb it back into Paytm given new money will be hard to come for the company,” the person said. To be sure, the talks may fall apart as there is disagreement between both the companies on deal terms, sources in the know said. SoftBank Vision Fund (SVF) is an investor in Grofers, while SoftBank Group (SBG) is on Paytm Mall’s cap table. SBG owns about 20% in Paytm Mall, while Alibaba holds close to 35% stake, with SAIF Partners, eBay and Paytm’s founder and CEO Vijay Shekhar Sharma being the other shareholders. SVF’s stake in Grofers is more than 40% and is its largest shareholder.

Separately, Paytm Mall has also held discussions to invest in or acquire milk delivery startup Milk-Basket, as it explores multiple other options in the online grocery segment, the sources said. Milk-Basket counts Kalaari Capital, Mayfield, Beenext and Unilever Ventures, among others, as investors. When contacted, SoftBank declined to comment, while a spokesperson for Paytm Mall denied the merger talks.

Grofers said in an email, “We are not aware of any investments by Paytm Mall. We are an independent business and do not comment on speculation.” MilkBasket did not respond to ET’s queries till press time on Thursday. The entry of Reliance JioMart, which went live across almost 200 cities in the online grocery market, has also led to investors in other vertical players looking to consolidate against the oil-to-retail behemoth. Mergers and acquisitions are likely to rise in India's startup world over the next 3-6 months, as companies and investors gear up for a year starved of capital and revenue due to the Covid-19 pandemic, ET had reported in April.