By Tanya Agarwal
The Chinese e-commerce giant Alibaba has led a $300 million funding round in BigBasket an Indian online grocery startup. Alibaba invested $146 million in the grocer. This will subscribe the company to compulsorily convertible preference shares, as confirmed by BigBasket.
The grocery space in India
The investment had been planned for several months. It is the largest raised by the company. Interestingly, it comes at a time when the competition is set to heat up with the entry of Amazon and Flipkart. Hence, Indias two largest e-commerce giants are eyeing the on-demand grocery segment. Experts say big players will look to expand the market this year.
Other investors
Sands Capital, International Finance Corp., and Dubai-based private equity investor Abraaj Capital participated in the round. The three investors had led BigBaskets $150 million fund-raise in March 2016. Other investors include Helion Venture Partners, Bessemer Venture Partners, and Ascent Capital. The firm did not comment on whether a part of the investment was a secondary share sale by some existing investors.
Utilisation of the funds
Invested money will go towards supply chain expansion. This means creating new sourcing channels with farmers. Funds will also be used for upgrading technology and growth of the customer base. The funds will be directed towards bettering our technological, analytical, and infrastructural prowess, all of which will enable the company to move up the curve. BigBasket is currently partnering with about 1,800 farmers throughout the country and aims to become the most preferred partner for up to 3,000 of them, said co-founder and chief executive Hari Menon.
Company background
BigBasket started operations from Bengaluru in late 2011. It has, over the years, expanded to 30 Indian cities. Its market includes everything from vegetables and packaged food to dairy products and kitchen utilities. Mr Menon co-founded BigBasket in December 2011 in Bengaluru. He did so with V.S. Sudhakar, Vipul Parekh, V.S. Ramesh and Abhinay Choudhari. In 1999, the team had set up Indias first e-commerce site FabMart.com. They then established the Fabmall-Trinethra chain. This was of more than 200 grocery supermarket stores in southern India.
Bigbasket said that Indias retail market is now worth over $900 billion with grocery shopping accounting for about $600 billion of that. The company wants to dig its feet deeper into cities it already has a foothold in. This goes against the conventional way of focusing on expansion into more cities. It claims to sell items worth Rs 200 crore every month. This figure may reach Rs 500 crore a month by March 2019. In comparison, its closest rival, Grofers, has a monthly turnover of about Rs 100 crore.
It will also strengthen its business-to-business delivery vertical. Here it offers itself as a technology-enabled grocery supplier to hotels, restaurants, and caterers. As of March 2017, BigBasket led the on-demand grocery segment with a 35.2% market share. Grofers and Amazon closely followed at 31.5% and 31.2% according to Kalagato, a market intelligence provider. Alibabas investment is likely to make way for a strategic partnership between BigBasket and Paytm Mall, an Alibaba investee company. Alibaba at one point was considering a direct investment in BigBasket.
From the CEOs desk
BigBasket is delighted to receive this funding from Alibaba, which will essentially be directed towards growth and consolidation. The multinational e-commerce retailer fits in best with what we believe in, said Menon. BigBasket had also considered an investment from Amazon and a possible merger with Grofers, Mint reported. None of these went through. Grofers is currently in talks with Tencent and its early investor SoftBank for a new round. Hari Menon said that investors picked up stakes in BigBasket through secondary share purchases as well. He declined to give a breakdown of the same. However, they confirmed that Alibaba now owns the biggest slice. BigBasket will use the funds to improve its technology, analytics, infrastructure, and marketing, Menon said.
Featured Image Source: Flickr