Tata-Bigbasket deal revs up e-grocery business
Post-acquisition, investors like Alibaba, Abraaj Group and IFC may exit the firm; Marquee investors will fight it out for market share
Bengaluru: Tata Group's move to acquire majority stake in online grocery retailer BigBasket will turn the group into the largest player in this space and increase competition for the existing players including Grofers, Amazon, and Walmart-owned Flipkart. Experts are of the view that the online grocery market will throw open more choices for consumers as marquee investors will fight it out for market share.
"Tata acquiring BigBasket is bigger and better than what appears currently. It will create duopoly in this new decade. The deal will also increase the pace of offline-online channels with more investments into supply chain," said Sanchit Vir Gogia, founder &CEO at Greyhound Research. "For Tata to ensure success of BigBasket and to ride on the massively growing market segment of e-grocery, it is critical to ensure Hari Menon, cofounder of BigBasket and team stay and allow them function on its own," he added.
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 annualised gross sales of $1 billion last year, BigBasket is the largest e-grocer in India. Others like Grofers, and etailers Amazon India and Flipkart are active in the e-grocery space, while Reliance Retail is making some serious inroads into this segment.
Founded in 2011, BigBasket is currently operating in 25 cities in India. Among the large institutional investors, Jack Ma-backed Alibaba Group has 29.1 per cent stake in the e-grocer. While Abraaj Group has 16.3 per cent stake in BigBasket, Ascent Capital holds 8.6 per cent in the company. Post this acquisition, investors like Alibaba, Abraaj Group and IFC are likely to exit the firm.
The deal values BigBasket at Rs 13,500 crore (around $1.85 billion), which is the biggest valuation in the e-grocery space. The company has entered the unicorn club (with a valuation of at least $1 billion) last year. Tata Group's acquisition of BigBasket is part of its effort to launch a 'super app' under which all its consumer businesses will reside.
"Tata Group needs to be watchful of not repeating mistakes from Tata Cliq. As far as ambition of creating a super app is concerned, much needs to be done from a service readiness and portfolio gaps perspective," Gogia of Greyhound Research said. In FY20, BigBasket reported a net loss of Rs 611 crore on a revenue base of Rs 3,822 crore.