Indian conglomerate Tata Group has reached an agreement to acquire a majority stake in grocery delivery startup BigBasket, two sources familiar with the matter told TechCrunch.
The salt-to-software giant is buying over 60% stake in BigBasket in a deal that values the Indian startup between $1.8 billion to $2 billion, sources said, requesting anonymity as the deal is still private. BigBasket has raised more than $750 million prior to the deal with Tata.
Chinese internet giant Alibaba, which owns nearly 30% stake in BigBasket, and a handful of other investors including Abraaj Group are getting a near complete exit from the startup as part of the deal with Tata Group, the sources said. New Delhi introduced restrictions last year that made it difficult for Chinese investors to write checks to Indian firms.
The terms of the deal says BigBasket would look to list in the public market by as soon as next year, one of the sources said. Two BigBasket co-founders and Tata Group did not respond to a request for comment.
Indian news network ET Now reported on Tuesday that the two firms were in advanced talks, signals of which began to emerge in local media two quarters ago.
The move comes as Mumbai-headquartered Tata Group, which reported a revenue of $113 billion in 2019 and operates several popular brands such as Jaguar Land Rover and tea maker Tetley, looks to expand to more consumer businesses and works to develop a so-called super app in the world’s second-largest internet market.
Bangalore-headquartered BigBasket, which competes with SoftBank-backed Grofers and Reliance’s JioMart, operates in over two dozen cities in India and turned profitable months into the coronavirus pandemic as sales skyrocketed on the platform. In recent years, BigBasket has expanded its own in-house labels of items, a move that has helped it improve its profit margins.
BigBasket and Grofers's userbases skyrocketed by as much as 80% last year, analysts at Citi Bank estimated in recent note, adding that JioMart, run by India's richest man Mukesh Ambani, had already started to pose serious competition.
In a recent note to clients, Bank of America analysts estimated that the online grocery delivery market could be worth $12 billion in India by 2023.
“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,” they wrote.
The expansion of Reliance Industries, one of India's largest industrial houses, in e-commerce last year may have prompted Tata Group to accelerate its digital efforts. Ambani raised more than $26 billion for his telecom and retail empires Jio Platforms and Reliance Retail last year from a roster of marquee investors including Facebook and Google.
Tata Group was working to expand to several consumer-facing digital services as early as 2016, but a boardroom coup put all those plans on the back burner, The Information reported in December.