Tata Group is leaving no stone unturned to become the leader of the E-commerce market. The business giant is in talks with Big Basket to acquire the majority stake. The deal discussion is going on for the last few months. Media portals predicted the outcome differently through secret sources.
Now, the wait is over. No more guessing. On Friday, Tata Digital approached the Competition Commission of India for its stake approval in India. Tata is investing $1.3 billion to acquire the majority stake in Big Basket, an online grocery store.
Why the Deal is Beneficial for Tata-BigBasket Both?
Recently, Tata is trying to establish itself in the majority of the business sectors. Digital transformation is the key to control the business market. The company could not make big progress in the digital field. After knowing the extra benefits of online business, Tata Group has started investing in online ecosystems.
Tata could not establish itself in the grocery market. The current acquisition of business giant Big Basket will help the company to establish itself in a new business area.
From the last few months, there is also a discussion about the Super App project by Tata Group. Under this project, Tata will bring all major industries under one roof. So, the Big Basket deal is the right step towards the Super App project. For the same project, Tata is in talks to acquire a major stake in 1MG, an online pharma company,
Talking about the current grocery deal, Rohan Agarwal, Director at consulting firm RedSeer, said:
“Tata group has a significant presence in the Indian retail market across the categories, and given an online presence is now necessitated, the potential deal will ensure faster entry into the e-Grocery segment.”
Why the current deal is a win-win situation for both parties? Replying to this question with Business Insider, Anand Kumar, managing partner of advisory firm Pier Counsel, told:
“This is a cornerstone of the bigger picture of consolidation. This will bode well with the Tatas omnichannel strategy. BigBasket can easily deploy more capital, manpower and take advantage of Tata Group’s logistics as well.”
In discussion with Business Insider, Devendra Agrawal, founder and chief executive officer of investment bank Dexter Capital Advisors told:
“It seems BB has realized what it would take to compete in the big leagues as they go up against Amazon and JioMart, the bridge round of ~$50 Mn to meet immediate expenses shows how capital intensive the business can get. With the challenges around Alibaba and challenges around Chinese Investors and other investors taking a cautious approach, it makes a lot of sense to partner with a deep-pocketed strategic partner and work towards profitability.”
Big Basket Growth and Tata’s Competition with Big Giants like Amazon, Reliance
Big Basket is a known name in the e-grocery market. It recorded a growth of 44% to Rs 3417.63 crore before the pandemic. But, its losses also surged by 22% to Rs 424.29 crore in FY20.
Pandemic helped the company a lot in growing. Due to lockdown, people ordered most of the household items online. Due to that, it saw a surge of 84% in the user’s traffic during the pandemic.
Big Basket has a long list of investors including Sequoia Capital, CDC group, Alibaba, and others.
Alibaba group as an investor is bringing the reputation of Big Basket down due to recent conflicts with China.
The current deal with Tata will allow complete exit to Alibaba Group. That will help the grocery giant in removing the China investing company tag.
When talking about the big players’ competition to capture Indian Market, Anup Jain, managing partner at Orios Venture Partners told Business Insider:
“For Tatas, this is a parallel play with Jio/Ambanis and Amazon/Flipkart. They see themselves as large in Retail with Croma, Westside, Starbucks and have missed the play in grocery retail. This is a comeback through grocery. The deal signals a 3-way consolidation in a large sector with Jio, Tata-BigBasket, and Amazon and probable isolation of Grofers which will need to figure its way forward.”
Finally, Indian business giants are understanding the benefits of e-commerce. They have to go long way to compete with Amazon. Companies like Flipkart have already established themselves in the online ecosystem.
The competition is tough. It will be very interesting to see how Amazon, Flipkart will respond to the current e-commerce scenario in India.