Tata Triggers Online Grocery War With Amazon, Reliance; Buys 68% Stake In Big Basket!
In a major milestone achieved towards the Tata Groups’ dream of launching a “super app” set to give competition to the likes of Softbank-backed Grofers and Reliance Jio Mart, Tata is set to essentially acquire Big Basket, the leading e-grocery market.
Unicorn Club Milestone
The deal amounting to between Rs 9300 cr to Rs 9500 cr catapults Big Basket into the coveted “unicorn club” of companies valuing at least a billion USD, with Big Basket valuated at Rs 13,500 cr or about $ 1.85 billion. Tata will be acquiring a majority stake of 68% in Supermarket Grocery Supplies which runs and manages the grocery delivery startup.
The deal is expected to take place over the next 4-5 weeks.
Stock Market Response
Stock market indices were boosted at the revelation of the news, as Tata consumer products rose 2.7% at Rs 645.5 on the BSE on Wednesday.
While Hari Menon, Big Basket co founder and CEO, along with top management colleagues retain their places on the board, the deal will usher out previous backers i.e Alibaba, Abraaj group and IFC.
The parties are awaiting permission from the Competition Commission of India.
Official comments from either party are unavailable at the moment and developments have been shared on request of anonymity by an insider since the matter is still private.
One Step Closer To “Super App” Dominance
Tata Sons Chairman N Chandrasekaran had expressed his company’s dreams of building a “super app” that would take on Ambani’s Jiomart, Amazon and Walmart-backed Flipkart.
It is being speculated that the expansion of Reliance Industries by winning a $ 26 billion investment from high-profile investors like Facebook and Google for Jio Platforms and Reliance Retail last year may have triggered this fairly aggressive development.
It is also worth noting that pandemic response by the Indian govt which sought to avoid hostile takeovers made it difficult for Chinese investors (such as Alibaba) to make payments to Indian firms.
A Burgeoning Indian Grocery Market
And not a moment too soon as Bank of America estimates the space of online grocery delivery services in India to be worth $12 billion by 2023. The pandemic has also generated massive growth and popularity of online grocery delivery markets as Big Basket registered an 84% increase in new customers , averaging 20 million orders a month and hitting $ 1 billion in annual revenues in 2020.
According to analyst and chief executive of Third Eyesight Devangshu Dutta, Big Basket has made its mark in the online space that only got more consolidated in the last one year. For Tata to switch from physical presence to digital space, the deal with Big Basket makes perfect strategic sense. The conglomerate can enjoy access to a larger consumer base.