Competition Commission of India approves BigBasket’s 64% stake sale to Tata Digital

INDIA – The Competition Commission of India (CCI) has given the green light for Tata Sons’ proposal to acquire a majority stake in Alibaba-backed BigBasket.

Tata Digital, a wholly-owned subsidiary of Tata Sons, had sought CCI’s approval to acquire a 64.3% stake in Supermarket Grocery Supplies, the business-to-business arm of BigBasket, through a mix of primary and secondary share purchases.

This is after the group had finalised a US$1.2 billion deal to acquire a majority stake in BigBasket, of which US$200-250 million would be a primary cash infusion into the online grocery startup.

The transaction, which marks one of the largest M&A deals in India’s digital sector, will put Tata in direct competition with Reliance’s Jio Mart, Amazon and Walmart-owned Flipkart, apart from SoftBank Vision Fund-backed Grofers.

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BigBasket is currently the leader in the online grocery segment and claims to have crossed the US$1 billion annual revenue run rate.

While Amazon and Flipkart are far larger in terms of reach in India, their online grocery businesses still make up a very small chunk of sales despite them making concerted efforts to grow in the segment for the last two years.

The entry of Tata into the scene is timely as India’s grocery market was estimated to be worth over US$600 billion in 2019 and has the potential to grow to over $850 billion by 2025, according to Red Seer.

The research firm notes that majority of this market is still controlled by unorganised retailers, largely kiranas, and presenting a huge room for growth for organised players.

Further, RedSeer said that the online grocery segment was “on an accelerated growth path post Covid and estimated that the segment would capture 3% of all grocery spends in India by 2025, making it a $24 billion opportunity.”

To consolidate its position in the market, Tata Digital is also likely to buy out Alibaba, which holds 27.58% stake and Actis LLP, which acquired several portfolios of scandal-hit Abraaj Group and owns 18.05% stake in BigBasket.

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Some other smaller investors in the online grocery startup are also expected to get an exit.

The deal could also include a plan to take BigBasket public by 2022-23, giving investors who remain an upside in the near future, according to reports by Economic Times India.

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