Tata group wants a slice of BigBasket

The Tata group is in talks to buy a stake in online grocer BigBasket as it plots to join Reliance Industries Ltd (RIL), Amazon and Walmart group in a market that is seeing explosive growth following the pandemic and lockdowns.

Two people familiar with the matter said the Mumbai-based conglomerate may in the first step join the ongoing fundraise of Alibaba-backed BigBasket, which is looking to raise around $200 million in primary equity infusion.

A potential deal will likely value BigBasket at nearly $2 billion, an almost 40% premium to its last fundraise, said one of the two people.

The funding round is also likely to see participation from global investors such as Singapore’s Temasek Holdings and Generation Investment Management, a private equity firm co-founded by former US vice-president Al Gore, and former Goldman Sachs’ Asset Management head David Blood in 2004, the people said.

“Tata, Temasek and Generation Investment Management are in advanced talks with BigBasket. The deal size is around $200 million, which will be entirely primary capital to boost the company’s growth,” the second person said, seeking anonymity. “The transaction in all likelihood is a pre-IPO round, and a public listing is expected in 18 months”.

Both people cited above did not disclose the size of the stake Tata group is looking to buy.

A Tata group spokesperson declined to comment. Temasek and BigBasket, too, declined to comment. An email sent to Generation Investment Management did not elicit a response till press time.

The news was first reported by Financial Times on Wednesday.

Mint reported on 25 May that BigBasket has appointed Goldman Sachs and Morgan Stanley to help raise funds and that the e-grocer is eyeing a valuation of $2 billion in its latest round.

“Covid has led to a metamorphosis of India’s retail sector, and with consumers adapting to online shopping swiftly, the segment has become even more attractive for investors. Tata’s interest in BigBasket could be a result of that,” said a consultant on condition of anonymity as he advises retailers.

Tata has a wide presence in the offline retail and fast-moving consumer goods segment. While the company made its online retail foray in 2016 with the launch of its online platform Tata Cliq, analysts said the company is yet to attain the scale of rivals Amazon and Flipkart.

In August, N. Chandrasekaran, chairman of Tata Sons, the parent firm of Tata group, said the group is building a super app that will go live in December or January. The app will put together the company’s offerings on a single platform.

According to a UBS Research note dated 21 September, modern retail is expected to expand faster than the overall retail market. “We estimate the proportion of modern retail in terms of sales could increase from 5.7% of the retail market in FY18 to 13.4% in FY23,” it said.

Tata’s interest in BigBasket comes at a time when the group is looking to enter the online commerce market in a big way.

In August, Financial Times cited Tata Sons chairman Chandrasekaran as saying the app would eventually encompass services from food and grocery ordering to fashion, electronics, insurance, healthcare and bill payments.

Kalpana Pathak and Tarush Bhalla contributed to the story.