Excl: Online grocery store EkStop in talks with Godrej, Birlas & an e-com firm for a merger

Mumbai-based Buy Daily Retail Pvt Ltd., which runs online grocery and daily essentials shopping store ekstop.com along with Ekstop Shop Pvt Ltd, is in advanced talks with four companies including offline retail ventures run by business houses for a possible merger, an industry source privy to the development told VCCircle.

The firm is in separate talks with Godrej Nature's Basket, Aditya Birla Retail's More, Maharashtra Hybrid Seeds Company Ltd (Mahyco) and a Bangalore-based e-commerce player. Although the e-com's firm could not be ascertained it is believed to be a horizontal e-tailer.

Separate email queries sent to spokespersons of Godrej Nature Basket, Aditya Birla Retail, Mahyco besides Flipkart and Amazon, two large horizontal firms, did not immediately elicit a response.

EkStop spokesperson declined to comment.

EkStop, which counts investors such as Ronnie Screwvala's Unilazer Ventures Ltd; Jayesh Parekh, co-founder of Sony Entertainment Television; Deepak Shahdadpuri of DSG Consumer among others, competes with the likes of BigBasket, the largest grocery e-tailer and the most heavily funded peer.

It is operational only in Mumbai as against BigBasket among others whose operation straddle multiple markets. BigBasket recently raised Rs 200 crore in a fresh round which makes it a formidable player in the space.

EkStop, which is believed to be doing 600-800 orders per day, has raised much modest sum in comparison.

It could not be ascertained if the decision to look for a strategic partner or a buyer is due to inability to raise large funding round to carry on the expansion. Various e-com firms, including those backed by early stage VCs, are looking for buyers as one vertical peer breaks out as a leader in the space and funding dries up for the followers.

One source said as per the plan, EkStop wants to sell up to 50 per cent stake to the strategic partner and use the funds to look for expansion to Bangalore, Hyderabad, Pune and Chennai.

EkStop was started by Sumat Chopra and Shaurya Mehta in May 2011 but went live only in May 2012. An alumnus of INSEAD business school and Carnegie Mellon University, Chopra has previously worked with Goldman Sachs, Morgan Stanley, Microsoft Corporation and Tata Capital.

Mehta (co-founder & COO), who is also from INSEAD and associated with University of Illinois Urbana-Champaign, has formerly worked with Deloitte and GE Healthcare.

If it strikes a deal with the offline players, it may continue the existing platform either with a rebranding or merger operations with the latent online presence of those retail chains. If it inks a deal with the e-com firm, it might become an additional products channel for the e-tailer.

Who can bring what to EkStop

Godrej Group's Nature's Basket, run by Natures Basket Pvt Ltd, is a hybrid retailer. Besides its offline stores, it also runs an online store and delivers to cities like Mumbai, Pune, Delhi NCR, Hyderabad and Bangalore.

A potential deal with EkStop could mean an end to independent EkStop site as Godrej would like to push its own online channel, which is integrated with cities where it has its own outlets.

If it goes ahead with Birla's More, it could be involved in creating a new website as More is not present online. Alternatively, EkStop could be rebranded to More.

Notably, AV Birla Grooup chief Kumar Mangalam Birla recently said he is looking at the e-commerce space.

If it goes ahead with a deal with either of these two business houses, it will be able to leverage upon the inventory and large existing storage infrastructure of brick and mortal stores of its partners.

Mahyco, which is into agri space, could bring linkages for fruits and vegetables sourcing for EkStop. EkStop could then retain its brand, get funding for expansion and a strong partner at the back end.

If the deal is with the e-commerce portal then it will become a sub-site of the bigger portal, said one of the source cited above.

While Flipkart is among the most obvious candidates who could be looking to expand into grocery, it would also be a big decision for the country's most heavily funded e-tailer. Selling groceries online requires much wider foot on the ground and delivery capability to take on the neighbourhood grocer.

Amazon, which already has a specialty gourmet food vertical, may get a bigger foothold in India with a possible deal with EkStop.

Both Flipkart and Amazon are flush with cash either raised or committed by their investors and parent, respectively.

(Edited by Joby Puthuparampil Johnson)