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Abu Dhabi, UAETuesday 18 September 2018

Alibaba is said to invest $200 million in Dubai's Abraaj Group-backed Indian online grocer

India remains one of the fastest growing and yet unconquered e-commerce markets for China's Alibaba and US' Amazon

Employees arrange tomatoes before weighing them at a BigBasket warehouse on the outskirts of Mumbai. Danish Siddiqui / Reuters
Employees arrange tomatoes before weighing them at a BigBasket warehouse on the outskirts of Mumbai. Danish Siddiqui / Reuters

Alibaba Group Holding, China’s e-commerce giant, plans to invest about $200 million (Dhs735 million) in India’s largest online supermarket, Bigbasket, leading a $280 million funding round in the startup, according to people familiar with the negotiations.

Alibaba is taking a stake of about 25 per cent in Bigbasket after months of negotiations, said the people, asking not to be identified because the matter is private. The Bangalore-based grocery business had previously been in talks for an investment from e-commerce pioneer Amazon.com, which in June agreed to acquire US grocer Whole Foods Markets.

In 2016, Dubai-based Abraaj Group led a $150 million round of fundraising for online grocer. The fundraiser saw the entry of new investors such as the International Finance Corporation and Sands Capital as well as participation from existing investors such as Bessemer Venture Partners, Helion Advisors, Zodius Capital and Ascent Capital.

The investment marks an escalation in the competition between the world’s two largest e-commerce companies in India, one of the world’s fastest-growing -- and as yet unconquered -- online retail markets. Amazon founder Jeff Bezos has vowed to invest $5 billion in the country as he challenges local leader Flipkart Online Services. Alibaba has invested in One97 Communications Ltd, which runs digital payment and e-commerce businesses.

The Bigbasket deal is awaiting approval from the country’s antitrust authority, the Competition Commission of India, the people said. That is now seen as a formality and should come through any day, one person said.

Bigbasket and Alibaba did not respond to emails seeking comment on the new funding.

The deal values Bigbasket, a purveyor of groceries and household needs like toothpaste and freshly-ground masala (spice) powders, at $800 million. An affiliate of One97’s Paytm E-commerce may join Alibaba in its $200 million stake with a small investment, the person said.

Grocery and daily essentials is a challenging business the world over, even in advanced markets like the US and China. Bigbasket, owned by Innovative Retail Concepts, operates in a country where expansion is difficult beyond the biggest cities because of rudimentary logistics and a shortage of refrigerated trucks and warehouses.

Growth will require capital expenditures, and Amazon got government approval earlier this year to invest $500 million into food retailing. Several high-profile grocery startups have collapsed in the last couple of years in India.

At the same time, online retailers can build loyalty and push high-margin private labels and fresh produce to buyers in the e-commerce segment that sees the highest repeatability.

Bigbasket’s TV commercials feature Bollywood actor Shahrukh Khan shopping for his home and then endorsing in Hindi “Main ek Bigbasket-eer hoon, aur aap?” (I’m a Bigbasket-eer, and you?). The company now delivers in over two dozen Indian cities and offers 18,000 products from over 1,000 brands.

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