Mumbai-headquartered salt-to-software conglomerate Tata Group has formally signed an agreement to buy online grocery major BigBasket as it aims to reign India’s soon-to-be USD 24 billion e-grocery market.
The USD 106-billion group is buying a 60-63% stake in BigBasket for USD 1.2 billion, a report by local media Economic Times (ET) said, citing sources, while wire service Press Trust of India and other media houses reported Tata is likely to acquire a stake of 68% for USD 1.31 billion.
Tata has been in talks with BigBasket for acquisition since last October.
The deal, which is one of the largest merger-and-acquisitions in the booming online grocery sector, reportedly values the Bengaluru-based startup between USD 1.8 billion to USD 2 billion. It will be a mix of the primary and secondary share sale, under which Tata will infuse primary cash of USD 200-250 million in BigBasket, the ET report said.
The e-grocer has raised more than USD 750 million since its inception in 2011. Its two biggest investors Chinese internet giant Alibaba and private equity firm Abraaj Group will get a full exit, the report added.
Alibaba first invested in BigBasket in December 2017 and holds about 30% market share currently. This comes at a time as the Hangzhou-headquartered company is looking to offload its shares in Indian startups due to the amendments in FDI the Indian government brought last April.
Aside from Alibaba and Abraaj, BigBasket’s institutional investors include Ascent Capital (8.6%), Helion Venture Partners (7%), Bessemer Venture Partners (6.2%), Mirae Asset Naver Asia (5%), International Finance Corporation (4.1%), Sands Capital (4%), and CDC Group (3.5%). These institutional investors are likely to take partial exits.
BigBasket’s co-founder Hari Menon and other senior executives are likely to stay in the company post acquisition. As a part of the deal, Tata Group will hold the first right of refusal on any sale of stake by other investors. It plans to take BigBasket public by 2022.
The e-grocery segment in the world’s second-most populous country has become highly competitive over the past year and this acquisition is further going to intensify the competition. BigBasket, which has been one of the leading players in this space, competes with Grofers, hyperlocal delivery startup Dunzo, as well as big pocketed players such as Amazon, Flipkart, and Reliance’s JioMart. Buying a controlling stake in BigBasket will make Tata Group one of the strongest players in the space.
The 153-year-old conglomerate, which has a diversified business portfolio across sectors such as automotive, airlines, chemicals, defence, FMCG, finance, home appliances, hospitality industry, IT Services, retail, e-commerce, real estate, steel, and telecom, had in fact quietly entered the e-grocery space in 2017. It launched its online grocery app, StarQuik, which leverages the network of retail outlets under Tata’s Star brand to offer daily essentials, fresh produce, bakery, beauty, and home needs, among other things.
Last August, Natrajan Chandrasekaran, chairman of Tata Sons, in an interview with UK-based Financial Times revealed the Indian conglomerate’s plan to roll out a super app. Its retail offerings would include food and grocery, fashion, jewelry, consumer electronics, consumer durables, financial services, education, healthcare, and bill payments, among other things.
In September 2020, BigBasket said the number of new customers has risen by 84% compared to the pre-COVID-19 levels while the retention rate grew by 50% against the earlier 30-45%. During the peak of the pandemic, the company claims to have facilitated 300,000 orders per day. In May alone, the company clocked USD 90 million in sales after discounts.