Tata To Buy Bigbasket For $1.3 Bn – Burning Issues

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What is happening?

The Tata group is in advanced talks to buy around 80% in BigBasket for around $1.3 billion,
Valuing India’s largest online grocer at around $1.6 billion.

After about five months of negotiations, the Tatas and BigBasket have agreed on the deal structure.
According to the proposal, the Tata group is likely to buy 50-60% from existing investors,
Including Chinese retail giant Alibaba and a fewother key investors.
Subsequently, the Tata group will infuse fresh money into BigBasket by buying new shares of about 20-30% of BigBasket,
Which will give Tata group almost 80% in BigBasket.
The deal is likely to be formally announced in the next few weeks.
This is not an easy deal to pull off with so many investors involved
China’s internet giant Alibaba, which holds around 29% stake in BigBasket, is expected to sell its entire shareholding.

Tata’s strategy appears to be to establish a beachhead in India’s e-commerce market amid a surge in online sales because of covid.
The main objective of the Tata group is to win a large market share in one shot.
BigBasket can make that possible.
The deal will also help the Tata group in conceptualizing its proposed ‘Super App’
By adding a wide range of household items and grocery products from BigBasket.

For the founders of BigBasket, having Tata in control will give it the necessary firepower,
To take on Reliance Industries Ltd, which aims to shake up the e-commerce market with deep discounts just as it did in telecom.

The Bengaluru-based online grocery firm gets around 300,000 orders daily.
It was valued at $1.23 billion in March.
The valuation of BigBasket is likely to be higher now as online grocery business has grown significantly after March as customers prefer to shop online to avoid physical contact due to the fear of covid.

Online grocery in India has been growing at a rocketing pace during the pandemic,
But the field is still wide open as none of the playershas yet made a dent.
About half of India’s $1 trillion retail market comprises grocery sales and there is huge potential for growth.
Reliance Industries announcing its intent to push grocery ecommerce through JioMart.
Amazon and Flipkart are the other two deep-pocketed competitors in the grocery segment, which has recorded exponential growth during the pandemic-induced lockdowns.

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