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Indian conglomerate Tata plans up to USD 2.5 billion in fundraising to boost its super app play

Written by Moulishree Srivastava Published on     3 mins read

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Mukesh Bansal, co-founder of Cult.fit, an online fitness startup in which Tata Group recently invested, has been made a key member of the fundraising team.

Indian salt-to-software conglomerate Tata Group is planning to raise between USD 2 billion and 2.5 billion from global investors for its digital arm, Tata Digital, which is working on creating a super app that will offer healthcare, food and grocery, fashion, jewelry, consumer electronics, payments, and financial services, among other things.

Natrajan Chandrasekaran, chairman of Tata Sons, the holding company of Tata Group, met many investors during his recent US trip in May “to showcase” the group’s new venture, said a report by local media Economic Times, citing sources. The Mumbai-headquartered giant is likely to first tap private equity investors and bring in strategic investors once the digital venture scales up, it added.

The 153-year-old conglomerate, which has a diversified business portfolio across sectors such as automotive, airlines, chemicals, defense, FMCG, finance, home appliances, hospitality industry, IT services, retail, e-commerce, real estate, steel, and telecom, has been testing the waters in the digital space since late 2016. It quietly rolled out several apps for e-groceries, online fashion and electronics shopping, doctor consultations, and personal loans, among others. The company set up Tata Digital in 2019 to streamline its various online offerings.

Startup

Read this: Indian family offices to invest USD 30 billion in local startups by 2024

When the COVID-19 pandemic hit the country in March 2020, leading to a steep rise in digital adoption among consumers and businesses, Tata Group decided to go all out to create an online retail empire. In August 2020, Chandrasekaran revealed the group’s plan to roll out a super app in an interview with the UK-based Financial Times.

The strategic play

Since late last year, the USD 106-billion conglomerate has been acquiring new-age internet companies that align with its vision of creating an “all-in-one” e-commerce app. After months of speculation, Tata Group bought a 64.3%  stake in online grocery major BigBasket for USD 1.2 billion in February 2021 to strengthen its foothold in India’s rapidly growing e-grocery market. Earlier this month, it acquired a majority stake in online healthcare startup 1mg, a move that will help it grab a bigger pie of the soon-to-be USD 10.5 billion e-healthcare market in the country.

Tata Group has also recently invested USD 75 million in Bengaluru-based fitness startup Cult.fit (formerly Curefit) to venture into the online fitness space. But more so than the sector, the company is believed to be interested in the five-year-old company’s co-founder, Mukesh Bansal. As part of the deal—which wasn’t labeled as an acquisition—Bansal has been appointed president of Tata Digital.

“The reason behind investing in Cult.fit was that Tata will get to bring on board Bansal as it pushes its fundraising efforts and makes him the face to bring in technology investors,” said the report, citing sources.

Before setting up Cult.fit, Bansal had co-founded online fashion portal Myntra in 2007, which was acquired by e-tail major Flipkart for USD 330 million seven years later. At Cult.fit, he raised over USD 400 million in the first four years since its inception in 2016.

Given his decades-long experience in running internet companies and raising capital, Bansal has been made a key member of the fundraising team, the report noted.

Read this: Flipkart and Amazon to face new regulatory challenges in India

Aside from Bansal, BigBasket co-founder Hari Menon, and 1mg co-founder Prakash Tandon, have also become part of Tata Digital. Both veteran entrepreneurs are expected to help Tata Group run the new digital venture, leveraging their domain knowledge, expertise, and vision.

Tata’s super app is rumored to be launching in September. As per media reports, it will feature e-commerce and payment services as hooks and give loyalty points to transacting customers that can be redeemed for Tata Group’s other offerings such as booking a flight or a room in Taj, Tata’s chain of luxury hotels.

Apart from fundraising, Tata Digital may receive capital from its parent company, which in May increased the authorized share capital of Tata Digital to INR 11,000 crore (USD 1.4 billion) from INR 1,000 crore (USD 134 million). This implies the quantum of money the group may infuse into its digital business.

This will help Tata Group build a war chest against deep-pocketed rivals like Amazon and Flipkart, as well as Reliance, India’s largest company by market cap, which ventured into the e-commerce space in May 2020 and is gearing up to create an ecosystem of digital services after raising USD 15.2 billion from global investors for its digital arm, Jio Platforms.

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