The Tata group is in active discussions to take a majority stake in BigBasket by purchasing several existing investors from the online grocery store, three people directly familiar with the talks said.
If the talks are successful, the Tata group could pay around $ 500-700 million in cash to a group of financial investors, mainly private equity funds and China’s Alibaba group, BigBasket’s largest investor, the people said, requesting anonymity.
“The talks currently depend on the extent to which the Tata group has in the company after 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 the Tata group, they also want the current management, led by the founders, to remain in control,” said this person. “Investors also want BigBasket to hit the IPO (initial public offering) market for the next calendar year, regardless of the incorporation of Tata,” added the aforementioned person.
A spokesperson for the Tata group declined to comment.
The deal, if finalized, will give the Tata group an immediate edge in taking on the big three players in India’s thriving online grocery market: Reliance Industries Ltd, Walmart-owned Flipkart, and Amazon.
For the Tata group, the deal aims to secure as much control as possible in India’s fast-growing e-commerce market before Reliance Industries Ltd and Flipkart get too big, the second person said.
mint reported on Oct. 14 that the Tata group joined the conversation to acquire a minority stake in Bengaluru-based BigBasket, which has been looking to raise $ 200 million in growth capital.
Along with the Tata group, private equity funds Temasek and Generation Investment Management were also in talks to invest in BigBasket.
BigBasket has experienced strong tail winds due to the Covid-19 pandemic, attesting to industry estimates that supermarkets will be the largest 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 0.5% and the absolute size is $ 2 billion. But it’s estimated to grow from $ 1.9 billion in 2019 to $ 3 billion by the end of the year, according to a September RedSeer report.
BigBasket, which has the largest market share in the online grocery space, saw new customers on its delivery platform increase by 84% between January and July, while the customer retention rate grew by 50%.
In August, Financial times reported that the Tata group is preparing a new platform, targeted for a December or January launch, that will bring together the various offerings of the salt-to-steel conglomerate on a single platform, dubbed a “super application” by Tatas.
“The application would eventually span services from food and grocery ordering to fashion, lifestyle, electronics, insurance, financial services, education, healthcare and bill payments,” N Chandrasekaran, president of Tata Sons, recently told investors.
BigBasket is India’s largest online food and grocery company with more than 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 whopping 70% to ₹ 3,200 crore in fiscal 2019. Although the losses widened, it crossed a billion dollar annualized gross sales rate for the first time in May.
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