Tata Sons Pvt. Ltd has agreed to acquire control of India’s largest online grocer BigBasket, according to a filing with the Competition Commission of India (CCI) on Friday, in a deal valued at more than $1 billion.
Tata Sons’ digital services subsidiary Tata Digital Ltd has proposed to acquire up to 64.3% stake in Supermarket Grocery Supplies Pvt. Ltd (SGS), which sells products to commercial units through business.bigbasket.com in the first step. Subsequently, SGS may acquire full control of Innovative Retail Concepts Pvt. Ltd (IRC), which sells products to customers 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 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.”
{{/usCountry}}According to the 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.”
{{/usCountry}}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.
Chinese retail giant Alibaba and a few other key investors together hold a majority stake in BigBasket. Alibaba alone owns 29% in BigBasket and is likely to sell its entire stake to the Tata group through this transaction.
“The deal is likely to be formally announced in the next few weeks,” the person cited above said.
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.
BigBasket, which has the biggest market share in online grocery, saw 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.
Tata Sons, through its group entities, is already engaged in the business of selling food and grocery, household products and personal and beauty care products.
But the BigBasket acquisition will give Tata an immediate head-start to take on its bigger rivals such as Reliance Industries Ltd, Amazon and Walmart-Flipkart in the retail industry, especially in the online grocery and household products space.