BigBasket raises $300 million from Alibaba, others

BigBasket, operated by Supermarket Grocery Supplies Pvt. Ltd, on Friday said it has raised $300 million in a Series E funding round led by Alibaba Group Holding Ltd, announcing a widely anticipated deal that would give the online grocery firm the resources to hold on to its lead in the market.

The investment, which had been in the works for several months, is the largest raised by the company and comes at a time when the competition is set to heat up with the entry of Amazon and Flipkart, India’s two largest e-commerce behemoths, into the on-demand grocery segment.

Sands Capital, International Finance Corp. and Dubai-based private equity investor Abraaj Capital participated in the round. The three investors had led BigBasket’s $150 million fund-raise in March 2016. Other investors in BigBasket include Helion Venture Partners, Bessemer Venture Partners and Ascent Capital.

The firm did not comment on whether a part of the investment was a secondary share sale by some existing investors.

Proceeds from the round will go towards supply chain expansion by creating new sourcing channels with farmers, technology upgradation and efforts to grow the customer base.

“The funds will be directed towards bettering our technological, analytical, and infrastructural prowess, all of which will enable the company to move up the curve. BigBasket is currently partnering with about 1,800 farmers throughout the country and aims to become the ‘most preferred partner’ for up to 3,000 of them,” said co-founder and chief executive Hari Menon.

BigBasket started operations from Bengaluru in late 2011 and has, over the years, expanded into 30 Indian cities. It sells everything from vegetables and packaged food to dairy products and kitchen utilities.

It claims to sell items worth Rs200 crore every month, a figure it expects will reach Rs500 crore a month by March 2019. In comparison, its closest rival Grofers has a monthly turnover of about Rs100 crore.

BigBasket plans to go deep in the cities in which it already has a foothold, the company said. It will also strengthen its business-to-business delivery vertical, where it offers itself as a technology-enabled grocery supplier to hotels, restaurants and caterers.

As of March 2017, BigBasket led the on-demand grocery segment with a 35.2% market share, closely followed by Grofers and Amazon Now at 31.5% and 31.2%, respectively, according to Kalagato, a market intelligence provider.

Alibaba’s investment is likely to make way for a strategic partnership between BigBasket and Paytm Mall, an Alibaba investee company, which at one point was considering a direct investment in BigBasket.

“BigBasket is delighted to receive this funding from Alibaba, which will essentially be directed towards growth and consolidation. The multinational e-commerce retailer fits in best with what we believe in,” said Menon.

BigBasket had also considered an investment from Amazon and a possible merger with Grofers, Mint had reported earlier. None of these went through. Grofers is currently in talks with Tencent and its early investor SoftBank for a new round.

Experts said big players will look to aggressively expand the market this year. The government last year allowed Amazon, Grofers and BigBasket, all majority foreign-owned firms, to invest in food retail in India—giving a go-ahead to FDI proposals cumulatively worth Rs3,750 crore.