The Tata group is in active discussions to take a controlling stake in BigBasket by buying out several existing investors of the online grocer, three people directly aware of the talks said.
If the talks are successful, Tata group could pay around $500-700 million in cash to a clutch of financial investors, mainly private equity funds and China’s Alibaba group, BigBasket’s largest investor, the people said, requesting anonymity
“The talks are currently hinged on the extent of say Tata group will have in the company post the deal,” said one of the three people.
“While BigBasket’s existing investors are not averse to the idea of selling a controlling stake to Tata group, they also want the current management, led by the founders, to remain at the helm,” this person said. “Investors also want BigBasket to hit the IPO (initial public offering) market by the next calendar year, irrespective of Tata’s coming on board,” the above person added.
A Tata group spokesperson declined to comment.
The deal, if struck, will give Tata group an immediate head-start to take on the three big players in India’s thriving online grocery marketplace: Reliance Industries Ltd, Walmart-owned Flipkart and Amazon.
For the Tata group, the deal is aimed at securing as much control as possible in India’s fast-growing e-commerce market before Reliance Industries Ltd and Flipkart become too big, said the second person.
Mint reported on October 14 that Tata group has joined the conversation to pick up a minority stake in Bengaluru-based BigBasket, which has been looking to raise $200 million in growth capital.
Along with Tata group, private equity funds Temasek and Generation Investment Management, too, were in discussions to invest in BigBasket.
BigBasket has seen strong tailwinds due to the Covid-19 pandemic, attesting industry estimates that grocery will be the biggest driver of online e-commerce, contributing 40% to gross merchandise volume between 2019 and 2024.
The online penetration of the grocery market is currently only at 0.5% and absolute size is $2 billion. But it is estimated to grow from $1.9 billion in 2019 to $3 billion by this year-end, according to a September RedSeer report.
BigBasket, which has the biggest market share in the online grocery space, saw new customers on its delivery platform increasing by 84% between January and July, while the retention rate of customers grew 50%.
“The app would eventually encompass services from food and grocery ordering to fashion, lifestyle, electronics, insurance, financial services, education, healthcare and bill payments,” N Chandrasekaran, chairman of Tata Sons, told investors recently.
BigBasket is India’s largest online food and grocery firm with over 18,000 products and 1,000 brands.
The Bengaluru-based startup, which recently became a unicorn, has a market share of more than 50% in the online grocery market.
Its revenue grew a massive 70% to ₹3,200 crore in FY19. Although losses widened, it crossed an annualised gross sales run-rate of $1 billion for the first time in May.