India’s Tata Group eyes majority stake in Alibaba-backed BigBasket

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India’s Tata Group is in advanced talks with the country’s largest e-grocer, BigBasket, to pick up 50% share for about $1 billion, several local publications reported. The e-grocer’s largest shareholder Alibaba Group may also sell its 26% stake along with a clutch of financial investors like Ascent Capital, CDC Group and the Abraaj Group.

“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,” a person aware of the development was quoted as saying by India’s Mint newspaper.  

The deal, if materialised, will allow Tata Group to enter the country’s fast-growing online grocery marketplace and to take on Mukesh Ambani-led Reliance Industries Limited, Walmart-owned Flipkart and Amazon. 

The person said that Tata Group is looking to secure as much control as possible in India’s e-commerce market before Reliance Industries and Flipkart become too big. 

The possible investment in BigBasket is expected to be executed through the conglomerate’s digital arm, Tata Digital, which is currently involved in building a strong online and digital business for the group. 

Tata Group, which previously held acquisition talks with e-commerce marketplaces Snapdeal and IndiaMart, is also preparing a new single platform which will put together its varied offerings. The Group calls it a “super app”, which is expected to be launched by January 2021.

“The app would eventually encompass services from food and grocery ordering to fashion, lifestyle, electronics, insurance, financial services, education, healthcare and bill payments,” Tata Sons chairman N. Chandrasekaran recently told investors.

The investment in BigBasket is just step one of several other similar tie-ups and collaborations that the group is looking to strike in order to scale its digital presence, according to a report by the Economic Times.

“The Group is looking to acquire internet companies as scalability of business through a combination of online and offline is seen as critical for future growth. Currently, none of the group’s retail businesses have that depth of scale in the e-commerce space,” a company source told the Economic Times.

The negotiations with Tata Group come at a time when BigBasket is engaged with investors like Temasek, Generation Investment Management, Fidelity and Tybourne Capital, to raise a $350-400 million.  BigBasket is also planning to hit the IPO (initial public offering) market by the next calendar year. 

BigBasket, which is currently the market leader with over 18,000 products and 1,000 brands, wants to raise funds to better compete with rivals especially Reliance Industries which intends to push grocery e-commerce through JioMart. Amazon and Flipkart have already recorded growth during the nationwide lockdowns and are further looking to increase investments.

BigBasket’s customer addition increased by 84% between January and July, while the retention rate of customers grew 50%, as per various estimates. The company’s revenue grew a massive 70% to $438.36 million in FY19. 

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