Tata to finally enter online grocery with CCI nod to BigBasket stake deal

Topics Tata group | BigBasket | CCI

The CCI has allowed Tata Digital, a wholly owned subsidiary of Tata Sons, to acquire up to 64.3 per cent of the total share capital of Supermarket Grocery Supplies Private Ltd (SGS)
The Tata Group is finally on its way to making an entry into the Indian online grocery segment. The Competition Commission of India (CCI) today permitted Tata Digital to acquire a majority stake in online grocery player BigBasket.

The CCI has allowed Tata Digital, a wholly owned subsidiary of Tata Sons, to acquire up to 64.3 per cent of the total share capital of Supermarket Grocery Supplies Private Ltd (SGS) and also be the sole control over Innovative Retail Concepts Private Ltd, which operates BigBasket’s online retail business.

With this approval Tata Digital will give exit to investors Alibaba that holds around 29 per cent stake in the company, along with investors Abraaj Group (16.3 per cent), and IFC (4.1 per cent). Tata’s have finalised plans to acquire this stake for about Rs 9,300 crore (about $1.2 billion).

According to sources close to the development, the top management, including co-founders and CEO, will continue with the company and the brand too will remain the same.

For Tata’s this will be its foray into the Indian ecommerce market. Earlier this month Tata Digital also invested in online pharmacy 1mg. According to reports, Tata Digital infused Rs 100 crore in 1mg via compulsory convertible debentures (CCDs).

K Ganesh, promoter with BigBasket shared that the finalizing of the deal is a very encouraging sign. “One of the criticisms of all the fast growth new age companies has been that the value creation and capital appreciation has been with foreign investors and institutions though these companies operate in India. Great to see Indian business houses making bold moves to embrace internet, technology enabled business models in core sectors. On the back of Zomato IPO news , this is good news for Indian investors. Tata is one of the most reputed brands and brings great synergies to Bigbasket,” added Ganesh.

According to a Statista Research, as of 2019, Bigbasket had the highest market share among online groceries in India at over 35 percent. The other competitors Amazon and Grofers were not far behind. The market value of online groceries was about 100.7 billion Indian rupees that same year.

According to a RedSeer report released in January 2021, the Indian grocery sector is an $850 billion market, with groceries accounting for 66 percent of the total retail spend in India. About 95 per cent of the grocery market in India is led by local kirana or mom and pop shops, riding on their ability to provide convenient and localised service to customers.

With big names including Tatas, Amazon, Reliance, Walmart-owned Flipkart and making their presence felt in this space, e-grocery is emerging as one of the most coveted retail segments. As marquee players line up, BigBasket will need serious money to remain a leader in the game, according to experts. Hence, a deal with the Tatas coming in as a strategic partner makes perfect sense, they say.

Supermarket Grocery had reported a consolidated net loss of Rs 611 crore in FY20, a 6.7 per cent rise from Rs 572 crore in the previous year. The company posted a 36 per cent jump in revenue at Rs 3,822 crore in FY20, according to business intelligence platform Tofler.

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