CCI approves Tatas’ proposal to acquire majority stake in BigBasket

The Competition Commission of India (CCI) on Thursday approved the Tata Group’s proposal to acquire a majority stake in BigBasket. Tata Digital can buy up to 64.3% of the total share capital of Supermarket Grocery Supplies (SGS), the business-to-business vertical of the e-grocer, through a combination of primary and secondary acquisitions. Subsequently, through a separate transaction, SGS may acquire sole control over Innovative Retail Concepts (IRC), a subsidiary of BigBasket that runs the consumer facing website bigbasket.com, filings showed.

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The transaction, valued at close to $1.2 billion, would value BigBasket at an estimated $1.5 billion. The deal paves the way for the Tatas to create a super app, that is a service through which a company aims to bring all its consumer offerings on a single platform.

While the deal has been in the works for some time, the timing could not have been more opportune. The pandemic has significantly altered consumer behaviour and nudged many more Indians to shop online. Consumers are increasingly banking on online platforms to buy all sorts of products — from apparel and fashion accessories to electronics and medicines.

Increasingly, households that typically buy their monthly groceries at neighbourhood shops or kiranas are embracing the digital route.

BigBasket co-founder & CEO Hari Menon had said last year that the firm had acquired “new customers by value three times, by number of orders three times and by number of members 2.6 times” as compared to the pre-pandemic period. “…We are seeing retention … this makes us feel confident that this behaviour is there to stay,” Menon had said.

RedSeer estimates the size (in terms of GMV) of the e-grocery market to jump to $18.2 billion by 2024 from $1.9 billion in 2019.

BigBasket and Grofers lead the local online grocery space. According to analysts, BigBasket has a considerable hold on high-income households, while Grofers has been able to tap into mid-income households that typically earn below `15 lakh annually.

Analysts said the backing of the Tatas will help BigBasket build on its growth. Though the start-up has been able to achieve a certain scale despite the presence of big players like Amazon and Flipkart, it will need support to expand in a space that is getting crowded by the day.

“The overall food and grocery segment is evolving. Reliance has already entered the segment and Walmart and Amazon clearly have long-term ambitions. They have deep pockets. Tata will give BigBasket the support to go ahead,” said an analyst. As far as the Tatas are concerned, the deal gives them a foothold in the digital e-commerce space. “They had piloted various initiatives but a scale was missing — a sizeable business with sizeable reach that offered strong consumer stickiness,” the analyst said.

Reliance, Walmart and Amazon are following the strategy of partnerships and acquisitions to expand their digital portfolio. Reliance, for instance, has partnered with Facebook-owned WhatsApp to seamlessly onboard kiranas and reach more consumers.