India’s Tata Group eyes stake in homegrown online grocer

Indian conglomerate Tata group is in talks to buy a stake in homegrown online grocer BigBasket, reports suggest. 

With this move Tata Group looks to join Ambani-owned Reliance Industries Ltd (RIL), US-based Amazon and Walmart in the Indian market that is seeing explosive growth after the pandemic and lockdowns.

Sources indicate that Tata Group may join the ongoing fundraising of Alibaba-backed BigBasket, which aims to raise around $200 million in primary equity infusion, in the first phase.

BigBasket is expected to be valued at nearly $ 2 billion if the deal comes through which is almost 40 percent premium to its last fundraising, a source said.

Global investors such as Singapore’s Temasek Holdings and Generation Investment Management which is a private equity firm are also likely to participate in the funding round, the reports said.

“Tata, Temasek and Generation Investment Management are in advanced talks with BigBasket. The deal size is around $200 million, which will be entirely primary capital to boost the company’s growth. The transaction in all likelihood is a pre-IPO round, and a public listing is expected in 18 months,” a source said.

Reports indicate that for its latest round, BigBasket has appointed the US-based investment firms Goldman Sachs and Morgan Stanley to help raise funds and that the e-grocer is eyeing a $2 billion valuation.

“COVID-19 has led to a metamorphosis of India’s retail sector, and with consumers adapting to online shopping swiftly, the segment has become even more attractive for investors. Tata’s interest in BigBasket could be a result of that,” said a consultant on condition of anonymity as he advises retailers.

In the offline retail and fast-moving segment of consumer products, Tata has a broad presence. Although the company made its online retail foray with the launch of its online Tata Cliq platform in 2016, analysts said the company has yet to reach the scale of rivals like Amazon and Flipkart.

N. Chandrasekaran, chairman of Tata Sons, the Tata group’s parent company, had said in August this year that the group is developing a super app that will go live in December or January. On a single platform, the app would eventually provide everything from food and grocery ordering services to apparel, electronics, insurance, healthcare and bill payments, he said.

Further, there were speculations that US-based retail giant Walmart will invest in the Super App to take on their rivals in the country together.

The interest of Tata in BigBasket comes at a moment when the company is looking to enter the market for online commerce in a big way.

Modern retail is expected to expand more quickly than the overall retail market, according to a recent UBS Research report. “We estimate that the proportion of modern retail sales will grow from 5.7% of the retail market in FY18 to 13.4% in FY23,” it said.

Tata Group

One of the oldest and largest conglomerates in India, the brand offers a variety of products and services from salt to technology. Founded in 1868, the company gained international recognition after purchasing several global companies including Jaguar Land Rover.

BigBasket

BigBasket is India’s largest online supermarket and allows a customer to walk away from the drudgery of grocery shopping and welcome an easy relaxed way of browsing and shopping for groceries. It functions in a number of key cities in the country.