Tata Group, the Mumbai-headquartered USD 113 billion conglomerate is close to buying 80% stake in e-grocer BigBasket for USD 1.3 billion after five months of negotiations.
The deal, which is expected to be a combination of the primary and secondary share sale, values BigBasket at around USD 1.6 billion, said local media Mint, citing three people directly aware of the development.
“Tata group is likely to buy 50-60% from existing investors, including Chinese retail giant Alibaba and a few other key investors,” the report said quoting sources. “Subsequently, the Tata group will infuse fresh money into BigBasket by buying new shares of about 20-30% of BigBasket, which will give the Tata Group almost 80% in BigBasket.”
Tata Group would take over the entire 29% stake of BigBasket’s largest backer Alibaba, which first invested in the Bengaluru-based startup in 2017. Alibaba led a bridge round of USD 60 million in BigBasket in April 2020.
“The deal is likely to be formally announced in the next few weeks,” the person said.
Earlier this year, after India changed its foreign direct investment (FDI) rules, making it difficult for Chinese investors to pump in money in Indian companies, BigBasket was reportedly in the market to raise USD 350-400 million at a valuation of USD 2 billion, 33% more than its current valuation. In September, the startup was reported to be in talks raise up to USD 100 million led by Temasek.
The Bengaluru-based online grocery firm, which reportedly gets around 300,000 orders daily, hit an annualized gross merchandise value (GMV) run rate of USD 1 billion in June.
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The e-grocery segment in the world’s second-most populous country is fast becoming crowded. Incumbents such as BigBasket and Grofers are trying to retain their market share from big pocketed players such as Amazon, Flipkart, Swiggy, Dunzo, and new entrant JioMart, that are ramping up their operations aggressively to get a bigger pie of this burgeoning market.
Buying a controlling stake in BigBasket will give Tata Group a firm footing in the soon-to-be USD 3 billion e-grocery market, and make it one of the strongest players in the space.
The conglomerate, which has a diversified business 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.
“The main objective of the Tata group is to win a large market share in one shot. BigBasket can make that possible, and the deal will also help the Tata group in conceptualizing its proposed ‘Super App’ by adding a wide range of household items and grocery products from BigBasket,” the report quoted one of the sources.
In 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. Tata Digital, the one-and-half-year-old digital arm of Tata Group, the wholly-owned subsidiary of Tata Sons, is expected to launch the proposed super app by the end of this year. Its retail offerings would include food and grocery, fashion, jewelry, consumer electronics, consumer durables, financial services, education, healthcare, and bill payments, among other things.