This is Tata Digital’s second major investment in an Indian startup this week. On Tuesday, the company announced a $75 million investment in fitness startup CureFit and named its co-founder Mukesh Bansal as president of Tata Digital.
The current deal is a primary and secondary share sale worth $250-$270 million, with other existing investors also infusing capital along with Tata Digital, according to a person who spoke on condition of anonymity. Of the total deal, $160 million will be in the form of primary infusion into the company.
Post the fund infusion, Tata Digital is expected to own almost 60% in 1mg and will increase its shareholding in the e-pharmacy startup in the coming months, the person said.
1mg’s early investors Sequoia Capital India and Omidyar Network India will exit the firm in the next two months, said a second individual with direct knowledge of the discussions. A secondary round will take place as part of this deal in the coming months, this person said.
With the fundraising, 1mg’s valuation is expected to cross $450 million, from close to $270 million before the deal, both the people cited above said.
“The investment in 1mg strengthens Tata’s ability to provide superior customer experience and high-quality healthcare products and services in the e-pharmacy and e-diagnostics space through a technology-led platform," said Pratik Pal, chief executive of Tata Digital.
Tata Digital added that e-pharmacy, e-diagnostics and teleconsultations are critical segments and will form a key element of the digital ecosystem that the company is building.
Incorporated in 2015, 1mg provides online delivery of medicines, health and wellness products, diagnostics services and teleconsultation.
“We are delighted to join hands with one of India’s most iconic and respected conglomerates. This marks a significant milestone in 1mg’s journey to make high-quality healthcare products and services accessible to customers across India," said Prashant Tandon, co-founder and chief executive of 1mg.
At present, 1mg operates three diagnostics labs and has a supply chain covering over 20,000 pin codes. It is also engaged in business-to-business (B2B) distribution of medicines and other healthcare products.
“By acquiring majority stakes in BigBasket and 1mg, Tata’s ‘buy and build’ strategy is focused on ‘need-based retailing’. Need-based retailing, including categories of food and medicine, account for almost 70% of India’s retail basket. These are also inflation-proof categories that see a high repeat purchase behaviour. This digital strategy is completely different from e-commerce platform CLiQ, where the Tatas were focused on discretionary buying," said Ankur Bisen, senior vice-president, retail and consumer, at management consulting firm Technopak.
“With Reliance, Flipkart and Amazon now playing in the ‘need-based retail segment’, the Tatas are catching fast through acquisitions," added Bisen.
In May, Tata Digital announced the purchase of a 64% stake in online grocer BigBasket. The digital arm of Tata Sons committed an investment of ₹1,591 crore ($219 million) in the e-grocery firm, showed regulatory documents.
In September last year, Reliance Industries entered the e-pharmacy space by buying a 60% stake in Vitalic Health Pvt. Ltd, the parent of e-pharmacy Netmeds for approximately ₹620 crore. Through investments and acquisitions, Tata Digital has been steadily building its digital ecosystem, under which it looks to bring all Tata group consumer businesses and offer digital services, including financial products and e-grocery.
Last month, Tatas increased the share capital of Tata Digital from ₹1,000 crore to ₹10,000 crore, regulatory filings showed. The digital arm of Tata Sons also aims to raise ₹5,000 crore by issuing commercial papers.
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