India: Alibaba, Paytm conducting due diligence on BigBasket stake buy

An employee weighs tomatoes after packing them at a Big Basket warehouse on the outskirts of Mumbai November 4, 2014. REUTERS/Danish Siddiqui/Files

Chinese e-commerce giant Alibaba Group Holding Ltd. and its Indian associate Paytm E-commerce Pvt are in talks to invest about $200 million for a stake of roughly 20% in India’s leading online grocer, Bigbasket, according to a person with direct knowledge of the negotiations.

Alibaba and Paytm are in a 60-day exclusive pact with Bigbasket and are conducting due diligence, said the person, who did not want to be quoted as the negotiations are private. The two could invest as a team or separately, the person said.

Several others are also said to be interested and in various stages of conversation with Bigbasket, including global retail titan Amazon.com Inc, said a different person familiar with the matter. Morgan Stanley is advising Supermarket Grocery Supplies Pvt, which owns the Bigbasket brand, on the fundraising, that person said. Bigbasket’s existing investors include the Dubai-headquartered Abraaj Group and Sands Capital. The talks were reported earlier by local media, including the Economic Times.

Bigbasket has been pushing Indians to shop for everyday essentials via their smartphones, and roped in Bollywood actor Shah Rukh Khan to market its services. Khan, who has a massive following, declares in the commercial, “Mein ek Bigbasket-eer hoon, aur aap?” (I am a Bigbasket-eer, and you?). The grocer’s express delivery feature brings regularly-needed essentials to customers’ door in 60 minutes.

As time-starved urban Indians ditch the neighbourhood kirana (grocery) stores and the crowded supermarkets in favour of buying daily staples and produce online, the country’s online grocery segment is heating up.

Amazon, which recently acquired specialty grocer Whole Foods Market Inc in the US, has got the government’s nod to invest $500 million into food retailing in India. An Amazon spokeswoman said in an email, “We have received the government approval for food retail based on our application for the same. We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain”.

The world’s leading online retailer is making a series of moves to capture the vital Indian market where e-commerce is growing at a rapid pace. Currently, Amazon has tied up with local kirana stores and its Amazon Pantry offering promises next-day delivery of groceries.

An investment in Bigbasket will give the Alibaba-Paytm duo the strategic arsenal to take on Amazon in India and the two have a broader collaboration in the digital payments space where the Alibaba and Ant Financialbacked Paytm Payments Bank Pvt is the dominant player. Meanwhile, Flipkart too is ramping up in the online grocery space.

A rash of online grocery retailers have perished in India for lack of funding and unhealthy revenue model. Besides Bigbasket, SoftBank-backed online grocery Grofers India Pvt is among the few remaining. Bigbasket with its 18,000 products, over 1,000 brands and deliveries in about two dozen cities dominates.

Bigbasket, Alibaba and Paytm did not respond to requests for comment.

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Bloomberg