Grofers was the first company to seek in August last year approval under the new policy notified by the Department of Industrial Policy and Promotion (DIPP), it said.
"Going a step beyond our initial commitment to the government, we intend to bring in an additional capital of USD 40 million within the next few weeks to expand our business further and grow the market," Grofers founder Albinder Dhindsa said in a statement.
The company is expected to use the funding to set up processing centres near mandis as well as bring in private labels for products as it looks to expand its play in the online grocery segment in the country.
The government had received investment proposals worth USD 695 million from three companies -- Amazon, BigBasket and Grofers after 100 per cent FDI was allowed for retailing food products manufactured and produced in India.
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While Amazon alone accounted for over USD 500 million of this, Grofers is believed to have sought approval for FDI worth about USD 25 million. Amazon received DIPP approval for its proposal earlier this month.
Dhindsa said Grofers will now be able to "provide even lower prices for its customers, while ensuring farmers get more value for their produce and a steady flow of income".
It will impact the farmer community in a positive manner and help generate employment in rural and semi-rural areas. It will also help reduce wastage and create a direct-line from farmers in the food supply chain, he added.
"Food and food products account for 70 per cent of Grofers' sales. This approval would ensure elimination of multiple layers between the farmer and the end customer, ensuring better quality and fresher products at cheaper prices," Dhindsa said.