Alibaba is poised to buy over a third of online grocer BigBasket, according to three people directly aware of the impending deal, for about $300 million. The transaction will add to a portfolio of strategic investments the Chinese e-commerce giant is building in India as it squares up against Amazon in one of the most dynamic markets for e-commerce.
The deal, which has been in the works for nearly six months, is expected to give the Bengaluru-based company a post-money valuation of about $850 million. The Alibaba-backed online retailer Paytm Mall is also likely to invest as a part of the $300-million round depending on the final structure of the deal, the sources said. “The deal is expected to be announced soon. The final contours of the secondary transaction are still being chalked out,” said one of the people cited above.
The Alibaba and Paytm Mall combine is likely to own around 35-40% stake in BigBasket, which is registered as Supermarket Grocery Supplies. The transaction is expected to involve a primary investment of about $220 million while $80 million will be used to acquire shares from existing investors.
Those expected to make partial exit include serial entrepreneur K Ganesh and Meena Ganesh’s GrowthStory and investment firms Ascent Capital, Zodius Capital and Helion Venture Partners, sources told ET. BigBasket co-founders Hari Menon, Vipul Parekh, Abhinay Chaudhary and VS Sudhakar are also likely to sell a portion of their holding in the company. They had earlier founded Fabmall which they sold to Aditya Birla Group in 2007. ET was the first to report in July that Alibaba and Paytm Mall are in talks to acquire a significant minority stake in BigBasket.
The deal price was expected to be about $200 million. This has since increased as BigBasket looks to build a bigger war chest to compete with US-based Amazon as well as India’s Flipkart, which has raised $4 billion this year and recently expanded into the online grocery space.
Alibaba, BigBasket and Paytm Mall did not reply to email queries from ET on the development. Amazon is preparing to retail fresh produce in the country after securing government approval to invest $500 million in the sector through its new entity — Amazon Retail. Amazon India has already built a significant presence in the segment through products like Pantry and Amazon Now. The online grocery or e-FMCG market is expected to cross $1 billion in gross sales by end of 2017 compared with $600 million during the previous year, according to estimates by RedSeer Consulting.
The grocery market has been growing at a high momentum of 55-60%, in contrast with the $17-billion online market, which is expanding at a slower pace of little over 20%. Alibaba’s move in India’s grocery market comes after it recently announced $2.87 billion investment for a majority stake in Chinese hypermarket chain Sun Art Retail Group to cement its position in the grocery market. The Internet conglomerate has been steadily increasing its focus in the grocery sector by launching supermarkets across China under its wholly-owned Hema division.
Prior to this, Jack Ma’s company was offering deep discounts on Tmall supermarket, its online grocery store. BigBasket’s in-house brands, including Fresho for fruits and vegetables and Happychef for gourmet foods, accounted for more than one-third its sales. It also started express delivery in 60 minutes last year and registered about Rs 1,400 crore in revenue in fiscal year 2017.
The company, which was valued at $450 million during its previous fundraising led by Dubai-based Abraaj Group, was in discussions with Amazon for an investment but the talks reached a stalemate over various issues, including valuation. The two parties, which have held multiple talks, could revive discussions. BigBasket had also explored a merger with SoftBank backed Grofers.
