Online grocery store BigBasket (Supermarket Grocery Supplies Pvt. Ltd) has raised Rs45 crore from venture debt firm Trifecta Capital to meet capital expenditure requirements, even as the company talks to a host of investors to raise at least $100 million (about Rs650 crore), said two people aware of the development.
BigBasket confirmed the investment by Trifecta.
The funds will be used to set up new warehouses and facilities for reprocessing fruits and vegetables, and for strengthening the cold chain infrastructure.
“We have a clearly identified use case for debt. We are present in 25 cities and continue to optimize our supply chain. A significant part of our business is fresh fruits and vegetables, the bulk of which is sourced directly from farms. It is crucial that we maintain the quality right up to the last mile,” co-founder and chief executive officer Hari Menon said in a statement.
“We are in the last leg of a pilot which will ensure that all fruits and vegetables are maintained at constant temperature and thereby improve shelf life of the produce by almost 10 days. This will be done using large-scale equipment such as pre-coolers and ventilators. Funding such capex requirements is best done through debt,” he added.
Mint reported on 23 November that BigBasket will hit the market to raise about $150 million early this year to fund its private label expansion.
Not only early-stage firms, but mature start-ups such as Byju’s, Urban Ladder, Swiggy and Oyo, which have raised $75-160 million from venture capital firms, have also opted for venture debt.
According to industry experts, start-ups are increasingly warming to venture debt to not only meet working capital needs but also to partially fund acquisitions and make bulk investments in new initiatives.
Venture debt providers lend Rs5-50 crore per transaction to start-ups at an interest rate of 15-17%. They enter only after start-ups have secured at least one round of funding from venture capital firms.
BigBasket is the best-funded home-grown online grocer with $220 million in funds from investors including Abraaj Group, Bessemer Venture Partners, Sands Capital, Helion Venture Partners and International Finance Corp.
“They (BigBasket founders) have leveraged economies of scale, technology, supply chain and logistics, backward integration and product mix to create a viable, high growth business that is delivering significant value to customers,” Nilesh Kothari, co-founder at Trifecta Capital said in a statement.
“Unlike other online grocery businesses, they are a full stack player and have already broken even in key markets like Bengaluru and Hyderabad. Besides, they are backed by very high quality and deep pocketed investors. We are excited to be part of their growth story,” Kothari said.
Trifecta Capital, founded by Kothari along with former Canaan Partners executive Rahul Khanna, has a target corpus of Rs500 crore. The fund has invested in 18 companies including PaperBoat, Rivigo, Urban Ladder, Industrybuying, OneAssist and Urban Clap.
BigBasket owns brands such as Fresho for vegetables, fruits, meat, and bakery products, Royal for staples, tea and cereals, Tasties for snacks, Fresho Signature for cookies, dehydrated fruits and exotic bakery range such as croissants and paninis, and HappyChef for gourmet products such as marmalade, pasta sauces, salad dressings and ready-to-eat products.
Menon told Mint in an interview in December that private labels will account for about 45% of the company’s revenue by March this year. BigBasket aims to clock revenue of Rs1,800-2,000 crore in FY17.
BigBasket was planning to expand its private label offerings to non-food categories and offer more items under its existing private brands. The company will start selling a private brand for wet wipes, disposable bags and buckets among other items. It will also sell new food products such as noodles and papadams under its private brand Tasties and honey, cereals and flavoured tea under Royal, Menon said in the interview.
The online grocery delivery start-ups have borne the brunt of a slowdown in investment since the middle of 2015, especially because they operate on wafer- thin margins, consequently losing money on every order delivered.
While the likes of PepperTap and Local Banya have shut shop in the last one year, incumbents such as BigBasket and Grofers have frozen expansion into new cities.