Tata group is in active negotiations to take a majority interest in BigBasket by buying out many existing investors from the online grocer.
If the talks are fruitful, a clutch of financial investors, mainly private equity funds and China’s Alibaba group, BigBasket ‘s largest investor, could pay about $500-700 million in cash to the Tata group, the people said, requesting anonymity.
The talks are currently focused on the degree to which the Tata group will have the deal in the company post, “said one of the three individuals.” While the current investors of BigBasket 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 stay at the helm, “said this person.” “By the next calendar year, investors also want BigBasket to enter the IPO (initial public offering) market, regardless of Tata coming on board.”
If struck, the deal would give Tata Group an immediate head-start to take on the three major players in India’s booming online grocery marketplace: Reliance Industries Ltd, Flipkart, and Amazon, owned by Walmart.
For the Tata group, before RIL and Flipkart become too large, the second person said, the deal aims to secure as much leverage as possible in India’s fast-growing e-commerce sector.
Thanks to the covid-19 pandemic, BigBasket has seen significant tailwinds, confirming industry forecasts that groceries will be the largest driver of online e-commerce, adding 40 percent to the amount of gross merchandise between 2019 and 2024. At present, the online penetration of the grocery industry is just 0.5% and the absolute size is $2 billion. But, according to a September RedSeer survey, it is expected to rise from $1.9 billion in 2019 to $3 billion by this year-end.
Between January and July, BigBasket, which has the largest market share in the online grocery space, saw new customers rise by 84 percent on its delivery platform, while the customer retention rate increased by 50 percent.
“In August, it was reported that the Tata group is planning a digital application for a launch in December or January that will bring together the numerous offers of the salt-to-steel conglomerate on a single platform, christened by the Tatas as a” mega app.
Ultimately, the app will provide services ranging from food and grocery orders to apparel, lifestyle, technology, insurance, financial services, education, healthcare, and bill payments, “Tata Sons chairman N. Chandrasekaran recently told investors.”
With over 18,000 items and 1,000 brands, BigBasket is India’s biggest online food and grocery company. The Bengaluru-based startup, which recently became a unicorn, has a market share in the online grocery market of more than 50 percent.