Exclusive: Online grocery retailer Grocery Factory raises seed round

Bangalore-based online grocery platform Grocery Factory has raised Rs 3 crore in a seed round of funding from a group of high net worth individual (HNIs) angel investors. 

The investors include Deepa Sankaran, former managing director of Darby Overseas, the mezzanine debt & private equity arm of Franklin Templeton, ex-McKinsey executives Navin Ramachandra and Madhu Rajendra,  Debashish Vanikar, president, Pidilite Industries and Ajay Prabhu, COO, QuEST Global. 

The startup will deploy the funds to expand its reach to tier-2 and tier-3 cities across Karnataka, B Karthik Shetty, co-founder and CEO, Grocery Factory told TechCircle.

Grocery Factory delivers staples and home care products directly from manufacturers to consumers (M2C). The startup sells all the products, processed by manufacturers based on its formulations, under its own brand. It is delivered directly to the consumers via its three-wheeler delivery vans. The van carries QR codes of all the products available. Besides ordering on its mobile app, users can scan the codes to place new orders, which will be delivered in 24 hours.

Shetty said the company will invest in strengthening its team and increase its delivery fleet to about 150 vans.

Grocery Factory was founded in 2016 by Shetty and Arjun B Shetty. The duo had previously built and exited a chain of supermarkets under the brand Daily Mart in Bengaluru.

The startup currently operates in about 20 pin codes in Bengaluru and claims to serve over 10,000 orders every month with an average ticket size of Rs 1,800. It plans to launch home care and personal care products on its platform soon.

The platform aims to be profitable with a revenue of  Rs 100 crore by the end of 2019. Shetty said the company is in advance stage of raising a pre-series A funding of $2 million.

Online grocery delivery is perhaps the most sought after ecommerce category among investors and marketplaces due to its high order frequency and customer stickiness. Alibaba-backed Big Basket and SoftBank-backed Grofers lead the market, and both have raised significant venture capital investments over the years. 

In their last-known funding rounds, Grofers raised $200 million in a funding round led by SoftBank Vision Fund and BigBasket secured $14.6 million venture debt from Trifecta Capital. In May 2019, BigBasket had raised $150 million, led by South Korean firm Mirae Asset.

Horizontal marketplaces Amazon and Flipkart are both going aggressive in their grocery business. Earlier this week, Amazon acquired a 49% stake in Future Coupons, a promoter entity of the Kishore Biyani-owned Future Retail. Future Coupons holds 3.96 lakh warrants in Future Retail. The warrants, when exercised, would convert into a 7.3% stake in Future Retail. Future Retail operates retail chains under several formats such as Big Bazaar and Nilgiris in supermarkets, Hypercity in the hypermarkets category and electronics chain Ezone. It manages over 2,000 stores across 400 cities, essentially controlling about a third of India’s organised food and grocery market. 

Flipkart, on the other hand, plans to expand its grocery business pan-India including tier-II and III cities. According to a recent report by CNBC-TV18, the Walmart-owned company is in negotiations to acquire grocery chain Namdhari's Fresh, which operates about 30 stores in Bengaluru.