At Rs 9500 cr, Tatas' buyout of BigBasket will be biggest in online grocery space

The deal, which is expected to close in the next four to five weeks, will give exit to investors Alibaba, Abraaj Group and IFC. The parties are awaiting approval from the Competition Commission of India (CCI).

The Tata group is in the final stages of acquiring a majority stake of 68 per cent in Supermarket Grocery Supplies, which runs and operates online grocery brand BigBasket, for about Rs 9,300-9,500 crore, said a source close to the development.

The deal -- biggest in the online grocery space so far -- values BigBasket at Rs 13,500 crore (around $1.85 billion). This comes about 20 months after the Hari Menon-led Bengaluru company had entered the unicorn club (companies with valuation of at least $1 billion).

The deal, which is expected to close in the next four to five weeks, will give exit to investors Alibaba, Abraaj Group and IFC. The parties are awaiting approval from the Competition Commission of India (CCI).

The top management, including co-founder and CEO Hari Menon, will continue to stay on board, said the source. The Tata group and BigBasket refused to comment on the matter.

The acquisition of BigBasket fits the Tata group’s plans for serious online play. Tata Sons Chairman N Chandrasekaran has in the recent past talked about the group’s  ambitions to have a super app.

“Our e-commerce play will be really big and we’ll not contend with a minor stake in any company,” a Tata Group spokesperson had last year said in response to a potential stake purchase in BigBasket.

“BigBasket has created a significant presence in the online space that has got certified further in the past 12 months. For Tatas to make a transition from a physical to a digital space, an inorganic route makes more sense,” said analyst and chief executive of Third Eyesight Devangshu Dutta. This transaction would allow the conglomerate access to a large customer base.

According to a RedSeer and BigBasket report, the total size of the e-grocery market in the country is expected to grow from $1.9 billion in 2019 to $3 billion by the end of 2020. At an annual growth rate of 57 per cent, it is expected to touch $18 billion by 2024.    

With big names including Tatas, Amazon, Reliance, Walmart-owned Flipkart and Udaan making their presence felt in this space, e-grocery is emerging as one of the most coveted retail segments.

As marquee players line up, BigBasket will need serious money to remain a leader in the game, according to experts. Hence, a deal with the Tatas coming in as a strategic partner makes perfect sense, they say. 

 Supermarket Grocery had reported a consolidated net loss of Rs 611 crore in FY20, a 6.7 per cent rise from Rs 572 crore in the previous year. The company posted a 36 per cent jump in revenue at Rs 3,822 crore in FY20, according to business intelligence platform Tofler.

BigBasket had earlier said it had seen an almost 84 per cent increase in the number of new customers accompanied by 50 per cent higher retention rates during the pandemic, compared to the pre-Covid levels. The Alibaba-backed company is currently recording about 20 million orders per month and reached the milestone of $1 billion run-rate in annual revenues last year.