Chinese e-commerce giant Alibaba is set to invest in India’s largest online grocer BigBasket in what will complete a transaction that has been in the works for nearly six months. BigBasket had been scouting for a potential buyer since the start of the year, and freports surfaced in July, that Alibaba through its investee firm Paytm was eyeing a stake in it. The investment could be in the range of $300 million, giving Alibaba about 33 percent stake in the e-grocer, according to reports.
The deal could value Bengaluru-based BigBasket around $850-900 million — a valuation it had been seeking since it started looking for buyers. It is also believed that BigBasket had held talks with Amazon earlier in the year, but those fizzled out on grounds of undervaluation. Amazon, meanwhile, is ramping up its food and grocery operations in India, and has received a government nod to invest $500 million in that business. The Seattle-based e-retailer has already tested services like Pantry and Amazon Now in India.
As for BigBasket, close to 40 percent of it would be owned by the Alibaba-Paytm Mall combine once the deal goes through. The transaction is likely to be carried out in two parts: a primary fund infusion of $220 million, and a purchase of shares worth $80 million from BigBasket’s existing shareholders. “The deal is expected to be announced soon. The final contours of the secondary transaction are still being chalked out,” an official told ET. Earlier, BigBasket had been eyeing at investment of $200 million.
Alibaba has already sought approval from the Competition Commission (CCI) of India to buy into BigBasket. The CCI notice stated, “The proposed combination relates to the acquisition and purchase of shares of Supermarket Grocery Supplies (BigBasket parent) by Alibaba Singapore.” However, it did not detail the proposed investment structure.
What this deal would do is create three strong entities — Amazon Retail, Flipkart and BigBasket — in the domestic online grocery segment that is already growing at more than 50 percent. And Alibaba’s interest in the space perhaps stems from the fact that India is among the top five e-grocery markets in Asia-Pacific, as per research firm Euromonitor.