Given the renewed focus on online grocery, Amit Sachdeva, CFO and finance head at Grofers, is optimistic about fundraising. The news is that the online retailer is in active discussions with existing and new investors for infusion of up to $60-70 million. Set up in 2013, the company counts the likes of Softbank, Tiger Global and Sequoia Capital as its investors.
The fundraising comes in response to the scaling up needed to cope with almost almost double demand during the lockdown.
Windfall sales require supporting growth infrastructure such as warehousing capacities, said Sachdeva. The company has already hired close to 2,500 people for our supply chain operations in the past few weeks, and intends to hire another 5,000 workmen in the coming weeks.
Sachdeva, an alumnus of Shri Ram College of Commerce and a certified public accountant, joined as CFO at Grofers in July 2019.
Edited excerpts:
Q. How deep has been the impact of COVID-19 on your annual financial plan and what changes have you made in terms of strategy?
A. Online grocery retailing has witnessed a massive demand surge as we are all locked in, also leading to capacity constraints and operational bottlenecks due to the initial disruptions in labor supply . We, at Grofers, continue to see unprecedented demand for online grocery on our platform, though we did have disruptions in our supply chain, leading to lower delivered orders and higher cost of operations. In terms of our overall strategy, we are currently realigning ourselves to minimise disruptions, conserve cash and reach out to as many customers as possible and do not see any major change in our overall plans.
We are also actively working with resident welfare associations (RWAs) and moving to a delivery model led by apartments to ensure continuity of deliveries at lower cost of operations.
Q. Is the supply chain equally affected for everything or are there areas where the damage is going to take a long time to heal?
A. We did see disruptions initially across our supply chain operations, both in the warehousing operations as well as last mile deliveries. After initial hiccups, we were able to scale up operations rapidly to take care of the elevated demand. Over the past few weeks, we have hired close to 2,500 people for our supply chain operations, and plan to hire another 5,000 workmen in the coming weeks.
This current lockdown has re-pivoted our focus on private labels and increasing share of our own brands upto 60 percent of our business in the next six months. Given that our large original equipment manufacturers (OEMs) work exclusively with us, they also faced huge disruptions, however we were able to work closely with them and provide logistics, working capital and distribution support to them.
Q. Which are the areas of focus for cost-cutting?
A. As we navigate through the new way of doing business, cash conservation has become one of the key elements for our business currently. We are leaving no stone unturned right now in cost reduction and every cost line is at scrutiny now with zero-based budgeting.
Here are some of the key measures we are taking:
- Concentrating only on core businesses and exit non-core units
- Expedite all receivables and work closely with vendors and partners to extend payment terms, and stronger control over working capital
- Variabilisation of our fixed cost models
- Let go of the office space and devise long term work from home policies
With all the initiatives being run across the organisation, we believe that Grofers will come out much stronger after this crisis as we learn to do more with less.
Q. Can technology and analytics help with cost-cutting? Do some projects become viable in these stressed circumstances?
A. We are a tech-first organisation and leverage our data science and tech capabilities in driving decision making across the organisation. Tech teams are helping us combat fraud abuse and hoarding activities, study consumer behavior, reduce cost reduction on supply chain and drive new initiatives around RWAs and apartments.
In addition, we are relooking at our tech priorities and reallocating capabilities to some of the new initiatives we are currently driving. While we are looking at short term cost reduction opportunities, we are also cognizant of some of the long term problem solving that we need to do in our business. We will not compromise on building such competencies.
Q. The GFC in 2008 unleashed a flood of capital globally which allowed many startups (Indian ones included) to benefit? Do you expect the same this time around? What is your assessment of how this crisis will play out for Indian startups?
A. As they say, in every crisis, there lies a great opportunity. And if you get ahead of this opportunity and solve problems around that opportunity, capital allocation will follow accordingly. Right now, it is anybody?s guess how long and painful this crisis will be.
We are of the opinion that we will have capital coming in to solve challenges unraveled in the current crisis like work from home solutions and secure teleconferencing. Leveraging of online data by fintech companies, know your customer (KYC) solutions, online education and learning will be amongst the few areas where we see renewed focus.
We at Grofers strongly believe that this is a tipping point for online grocery and there is a huge opportunity for ?Grocery as a Service?. We find ourselves in a unique position having built a grocery specific supply chain over the last six years and being ahead of our competition. We foresee increased capital allocation to online grocery.
Q. What happens to the cost of capital for Indian companies as this crisis proceeds?
A. We still need to see the long-term and the far-reaching impact of COVID-19 and the same continues to evolve. In the near future, interest rates will continue to fall and easy provision of credit and tax breaks will reduce cost of capital for Indian companies.
In addition, as supply issues are resolved, we will see huge focus on demand stimulus as well as an attempt to attract capital investment.
Q. How much of a differentiator will access to capital be for startups?
A. Startups or other young businesses that are solving problems have scalability and show potential for long-term growth will continue to have access to capital. As new products for raising funds continue to evolve, venture capital still remains the most popular for driving long term value for investors. As I mentioned earlier, the current COVID-19 will create new opportunities for problem solving and I believe, startups and entrepreneurs will rise to the occasion and will have an important role to play, more than ever before.
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