February 17, 2021: Tata is to buy stake in BigBasket amounting to Rs 9,100 crores and this is deal likely to conclude in 4-5 weeks in the Bengaluru headquarters. The acquisition will be for a majority stake of 68% in the grocery delivery startup BigBasket.
According to the CNN, the deal was finalised this month.
TATA to buy stake in BigBasket
Structure of the deal to acquire stake in BigBasket
The transaction, which is a mix of a primary and secondary sale of shares, will provide a full exit to two of BigBasket’s biggest investors, Chinese e-commerce giant Alibaba and scandal-hit private equity firm Abraaj Group, as Economic Times reported on January 20.
While Alibaba Group holds a 27.58% stake in the company, Abraaj owns about 18.05%, according to data from business intelligence platform Paper.vc.
Acquiring the stakes of just these two investors will give Tata Group close to the majority stake that it is seeking in BigBasket.
ET Now reported that the Tatas will pay nearly Rs 9,500 crores for a majority 68% stake in BigBasket at an enterprise value of Rs 13,500 crores.
Founded in 2011, BigBasket operates in 25 Indian cities. It competes with SoftBank-backed Grofers as well as Amazon India and Flipkart.
According to reports, the top management of BigBasket, including co-founder Hari Menon, may continue with the company for three to four years. However, Menon did not respond when reached out for comments.
Outcomes of the deal: TATA to buy stake in BigBasket
The salt-to-software conglomerate, Tatas, are providing a full exit to China’s Alibaba from BigBasket. The Chinese major holds more than 27% stake in BigBasket, on which Tatas declined to comment.
The transaction will see a $200-250 million primary cash infusion in BigBasket by Tata, as part of its larger deal to acquire a majority stake in the country’s largest online grocery company, people close to the matter said.
The transaction is seen as one of the largest mergers and acquisitions (M&A) deals in the digital economy of India till date. BigBasket’s last round valuation was $1.2 billion.
The Tata Group will hold the right of first refusal on any such stake sale by other investors. BigBasket CEO Hari Menon said recently that an IPO would help investors exit, without elaborating.
The deal comes at a time when online shopping has accelerated in India, especially in the aftermath of COVID-19 pandemic.
Tata has been planning to launch a Super App that will tie in all its consumer businesses, according to media reports and to stamp its presence in the e-commerce space currently dominated by Amazon and Walmart-owned Flipkart, while Reliance Retail is also making heavy inroads in the sector.
“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.
Tata to acquire stake in 1mg
Tata Group is also close to finalising a secondary transaction of $200-250 million to acquire a 55% stake in online pharmacy 1mg. The investments in BigBasket and 1mg will give wings to Tata’s upcoming digital service along the lines of a super app, which will give consumers a single point of access to myriad services, including online shopping for groceries, medicines, electronics, fashion and more.