Tata Group has signed on the dotted line with BigBasket to become the new owner of the online grocery startup. On Tuesday, ET Now reported that the deal will give the Tata Group a 68% stake in the company for $1.3 billion (Rs 9,500 crore). The deal values the startup unicorn at $1.8 billion or Rs 13,500 crore according to the report. After the whopping $16bn Flipkart-Walmart deal in 2018, this deal would soon come as the largest M&A in India’s startup ecosystem. While Tata is yet to make an official announcement on this, both Tata group and BigBasket are now in the process of seeking all the requisite approvals. The founding team at Bigbasket along with the CEO, Hari Menon will continue to stay on at the company to run its operations.
BigBasket was supposedly valued at $1.2 billion in October 2019 when it acquired hyperlocal grocery delivery platform, DailyNinja. The company which reported losses of Rs 709 crore for the financial year 2019-20 is the first acquisition in Tata Group’s plan to create a digital consumer business as part of creating a super app. Reports have also suggested that Tata Group is in talks to acquire a majority stake in e-pharmacy player, 1MG.
The Tatas-BigBasket deal assumes significance for several reasons, besides its sheer size. Firstly, the salt-to-software conglomerate, Tatas, is providing a full exit to China's Alibaba from BigBasket. The deal is expected to create an exit for BigBasket’s largest shareholder and Chinese internet company, Alibaba E-commerce Pvt Ltd which held a 16.45% stake in the company for the financial year ending March 31, 2020, as well as Abraaj Group, which held a 15.02% stake during the period. All of this at a time when India has virtually stopped all fresh Chinese investments. Secondly, Tatas will get access to BigBasket's massive user base and can leverage it for cross-selling and lastly, the BigBasket deal could very well be the start of Tatas' ambitions for a SuperApp. The plan is to bring all consumer products and services on one platform including food, grocery, consumer durables, jewellery, financial services, etc.
“Competition is high in the sector with large verticals like BigBasket/Grofers and horizontal like Amazon/Flipkart trying to convert the unorganized market to organized one. Till recently the No 1 player in the space was BigBasket, with it hitting $1 billion annualized GMV & selling over 300,000 orders every day. Reliance Industries also threw its hat with the company launching its JioMart app in May-20 across 200 cites,”
With the spike in online sales during covid times, Tata strategizes to make stronghold on the e-commerce market. Tata is also looking forward to the access it will receive of BigBasket’s massive userbase so that it can leverage it for cross-selling, giving a strong competition to big e-commerce companies like Reliance backed Jio Mart, Amazon and Flipkart.