Paytm Mall, the e-commerce division of India’s largest mobile wallet company, Paytm, is reportedly investing in online grocery firm BigBasket the market leader in the category. Paytm has begun due diligence on the Bangalore-based firm and might invest up to $200 million in it. BigBasket is currently valued at $450 million and is looking to take that up to $550 million with Paytm’s investment. Interestingly, BigBasket had also been in talks with e-commerce giant Amazon for a potential buyout. Also Read - How to book COVID-19 vaccine slot via Paytm App, get Covaxin and Covishield shots with these simple stepsAlso Read - iPhone 11, iPhone XR up for grab with massive discount on Flipkart Big Saving Days sale
However, the talks have stalled for some reason. Meanwhile, Amazon that is getting serious about its grocery business in India, has just received the government’s nod for a $500 million FDI investment. The Seattle-based company’s its proposal was pending before the Foreign Investment Promotion Board (FIPB). According to the proposal, Amazon will open a wholly-owned subsidiary in India to carry out its grocery business; it will thus stock food products and sell them online. BigBasket and Grofers have also applied for a direct selling licence. ALSO READ: Amazon gets government nod for proposed $500 million investment in food retail in India Also Read - Flipkart Big Saving Days sale begins: Pixel 4a, Realme X7, Samsung Galaxy F62, more on discount
BigBasket has been scouting for fresh investments this year. Besides takeover talks with Amazon, it had also explored a possible merger with domestic rival Grofers, which is backed by Japanese telecom and investment giant Softbank. However, nothing concrete has emerged thus far primarily because BigBasket wants a higher valuation ($700-800 million) than what investors are willing to offer.
Paytm’s interest in BigBasket comes at a time when the Alibaba-backed company is significantly diversifying beyond its core wallet operations. It has already made steady strides in categories like online travel and ticketing, and is pushing sales on its newly formed marketplace Paytm Mall too. Food is next. “The deal will help Paytm Mall strengthen its online-to-offline strategy (using BigBasket s partnerships with corner stores), helping them take on Amazon,” an official was quoted as saying. ALSO READ: Paytm launches new e-commerce platform Paytm Mall
Grocery is one of the largest segments in retail. It makes up $275 billion of the $630-billion retail market in India. The penetration of online grocery though continues to be low, thus presenting ample opportunity for both Amazon and Paytm. They would take that considering they ceded ground to Flipkart in the fashion segment after the latter acquired Myntra and Jabong. However, Flipkart struggled with its grocery operations, Flipkart Nearby, and shut it down within four months. Poor margins and sustained low demand led to its death.
While most e-tailers have so far been unable to crack the grocery segment, things could change very soon as new players come aboard.