Subscription-based e-grocery startup RainCan raises pre-Series A funding

Bloomskart Retail Pvt. Ltd, the firm behind online grocery startup RainCan, has secured $270,000 (Rs 1.75 crore) in a pre-Series A round from IIFL Holdings Ltd Group CFO Prabodh Agarwal and existing investor Dr. Aniruddha Malpani.

The Pune-based company will use the money to set up a logistics platform and expand its existing network of delivery centres. “We aim to take the current four centres to 20 in Pune and Mumbai over the next few quarters,” said RainCan co-founder Munendra Singh.

Founded in 2015 by IIT Bombay alumni Singh and Abhijeet Kumar, the startup allows its registered subscribers to choose from an array of product categories, including dairy, bakery, perishables and staples. It employs a team of 60 people to source products from its distributor network and meet the three-hour door-step delivery deadline, starting six in the morning.

RainCan claims to service around 6,000 orders every day. The company has crossed Rs 10 crore in revenue, and is currently witnessing growth of 15% every month, it said in a statement.

“Selling fresh produce online is still at a nascent stage, and the service is expected to grow exponentially, as more customers discover its convenience. RainCan has built a business model with good unit economics. With proper capital backing, it has the potential to satisfy many more customers,” said IIFL’s Agarwal.

Trying times

According to a recent India Brand Equity Foundation report, India’s food retail market is expected to reach $915 billion by 2020.

But the e-grocery segment has been going through trying times since mid-2015, with funds from investors drying up, margins remaining wafer-thin and high cash-burn rates. At least half a dozen startups in the segment had to shut shop in 2016 alone.

BigBasket and Grofers, the leading players in the e-grocery space, have also felt the tremors.

BigBasket, operated by Bengaluru-based SuperMarket Grocery Supplies Pvt. Ltd, works on an inventory-led model and has so far raised about $250 million in external funding. It had registered a three-fold year-on-year increase in revenue to Rs 563 crore in 2015-16.

Grofers, which started off as a marketplace, had recently moved to an inventory-based platform. It has raised about $200 million and counts SoftBank, Tiger Global and Sequoia Capital as its investors.

However, the company had to shelve its rapid expansion plans because of high cash-burn rates and was subsequently forced to curtail its operations in many cities, and lay off staff.

Lesser peers, such as Snapdeal-backed PepperTap, downed the shutters on its grocery delivery vertical to focus only on its logistics business. Mumbai-based online supermarket LocalBanya have also closed down.

Green shoots

The sector has, however, witnessed a revival in fortunes of late. It is gearing up for more competition as Amazon, BigBasket and Grofers have received regulatory approvals to invest in the food-only retail business, following the government’s decision to allow 100% foreign direct investment in the food processing sector last year.

The FDI regulation allows multinationals to set up wholly-owned subsidiaries in India to retail food products through online as well as brick-and-mortar outlets. The only rider is that companies will have to produce, process or manufacture the food products in India.

Seattle-based Amazon is planning to invest around $515 million over the next five years in the e-grocery segment. The Tata Group is also reportedly in talks with Gurgaon-based e-grocery startup GrocerMax, and Flipkart is mulling to take a second attempt at the grocery business.

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