Zomato seeks CCI approval to acquire 9.3% stake in Grofers

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IPO-bound Zomato has sought approval of the Competition Commission of India (CCI) to acquire a 9.3 percent stake in online grocery firm Grofers.

The proposed transaction is not expected to have any impact on the competitive landscape in any potential relevant market in India, Zomato stated in a document filed with CCI.

The two companies signed off the deal on June 29  that was first reported by Moneycontrol. 

It comes at a time when more consumers are buying groceries online, owing to the COVID-19 pandemic.

As part of the deal, Zomato and existing investor Tiger Global will invest around $120 million in the grocery startup at a valuation of over one billion dollars. Tiger will be investing a small amount.

With this investment, Grofers will turn into a unicorn, a term used to describe privately funded technology startups that have a valuation of a billion dollars or more. Moneycontrol had also reported on June 18 that Zomato and Grofers were pressing ahead with the deal and that an announcement was imminent.

In its submission to the CCI, Zomato has stated that the potential relevant markets are highly fragmented with the presence of multiple players, including several unorganised players, who will continue to impose significant competitive constraints.

It added that the activities of the two companies broadly overlapped across segments such as groceries, household items, general merchandise, personal hygiene and fruits and vegetables in India.

The deal is happening at a time when Zomato is awaiting market regulator SEBI's approval for its IPO. It had filed the Draft Red Herring Prospectus (DRHP) in late April, kicking off one of India's most anticipated internet initial public offerings (IPOs) this year.

SEBI is likely to issue its final observations in the draft offer document in the coming fortnight, a prerequisite for any company seeking to offer its shares to the public. Zomato's preliminary roadshows with investors also have got off to a good start, with its public issue evincing a lot of interest from institutional investors.