Tata Will Buy Big Basket For Rs 7500 Crore: Tata’s Biggest Gamble For Conquering Online Grocery

According to a filing with the Competition Commission of India (CCI), Tata Sons Pvt. Ltd plans to buy a majority stake in India’s largest online grocer BigBasket. The deal proposes to buy more than $1 billion acquiring a 64.3% stake in Supermarket Grocery Supplies Pvt. Ltd (SGS) which sells products to commercial units through business.bigbasket.com in the first step.

SGS will then take complete ownership of Creative Retail Concepts Pvt. Ltd (IRC), a company that offers goods to consumers through bigbasket.com. SGS and Innovative Retail sell food, grocery, household items, personal and beauty care products through the BigBasket app.

“The 64.3% stake will cost (Tatas) around $1 billion,” said a person directly familiar with the deal, adding that within a year, “Tata may infuse additional capital into BigBasket, which may enhance its effective holding to about 80% or more”. “Tata Sons held a board meeting a little more than a week back.

The deal has been approved by the board, and a CCI approval has been sought,” said this person.

According To The Latest Transaction Of CCI Filing

According to the Competition Commission of India (CCI) filing, the latest transaction involves “acquisition by Tata Digital of up to 64.3% of the total share capital of SGS through a combination of primary and secondary acquisitions, in one or more series of steps (transaction 1). Subsequently, through a separate transaction, SGS may acquire sole control over IRC (transaction 2). The proposed transaction will result in the acquisition by TDL of a majority stake of and control over SGS.”

On December 2, Mint reported that the Tata group is in advanced talks to acquire up to 80% in BigBasket for around $1.3 billion, valuing India’s largest online grocer at around $1.6 billion. “In this deal, most of the large non-promoter investors will get an exit. The founding shareholders will continue to have a stake. Tata has proposed to buy the 64.3% from existing non-founder, non-promoter investors,” said the person cited above.

Alibaba, a Chinese retail giant, and a few other primary investors own a majority stake in BigBasket. Alibaba holds 29 percent of BigBasket and is expected to sell the entire company to the Tata group in this deal.

“The deal is likely to be formally announced in the next few weeks,” the person cited above said.

BigBasket Saw Strong Tailwinds Due To The Pandemic

On October 28, Mint reported BigBasket saw strong tailwinds due to the pandemic, attesting estimates that grocery will be the biggest driver of online e-commerce, contributing 40% to gross merchandise volume between 2019 and 2024. The online penetration of the grocery market is currently only at 0.5%, and the absolute size is $2 billion. But it is estimated to grow from $1.9 billion in 2019 to $3 billion by this year-end, according to a September RedSeer report.

New customers on its delivery platform increasing by 84% between January and July, while the retention rate of customers grew 50%. While BigBasket’s existing investors were not averse to the idea of selling a controlling stake to Tata group, they also want the current management, led by the founders, to remain at the helm, said the person cited above.