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BigBasket inches closer to unicorn tag after raising $300 mn from Alibaba, others

BigBasket inches closer to unicorn tag after raising $300 mn from Alibaba, others
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SuperMarket Grocery Supplies Pvt Ltd, which owns the BigBasket brand, has raised $300 million (around Rs 1,921 crore) in a fresh funding round led by Chinese e-tailer Alibaba, the online grocer’s chief executive officer told VCCircle.

CEO Hari Menon, who is also BigBasket’s co-founder, said that Alibaba contributed around 75% (around $225 million or Rs 1,440 crore) of the total funding while existing investors Abraaj, International Finance Corporation (the investment arm of the World Bank), and Sands Capital accounted for the rest.

Menon said the money was raised through a mix of primary and secondary transactions.

Morgan Stanley advised BigBasket for the transaction.

“Now that our backend is all set and ready, the funds will primarily be used for growth and consolidation, as we are not expanding into any more cities,” Menon said.

He did not provide any details about valuation. However, a source close to the company told VCCircle that BigBasket’s valuation is approaching unicorn status – a startup valued at $1 billion – post this funding round.

“The company now commands a valuation of around $950 million,” the above-mentioned person said.

Just last December, the Competition Commission of India had cleared Alibaba Group’s acquisition of a stake in the online grocer.

The development comes after months of speculation, triggered by several media reports, which stated that BigBasket was set to raise between $200 million and $300 million from Alibaba and Paytm Mall combined as well as from existing investors. However, Paytm Mall did not participate in the latest funding round.

In September last year, news website The Ken had reported that BigBasket had secured $280 million in a Series E round from existing investors Sands Capital and Dubai-based Abraaj Group, besides new investors Paytm Mall and Alibaba Group. However, in December last year, The Economic Times, citing people in the know who did not wish to be identified, had reported that Alibaba was set to put in $300 million for a 35-40% stake in BigBasket, translating into a post-money valuation of $850 million.

Big Basket, which is currently the country’s top grocery e-tailer, operates in 27 cities clocking Rs 200 crore in terms of monthly run-rate.

“We hope to bring this number to Rs 300 crore by August-September this year and hit a Rs 500 crore monthly run rate by March 2019,” Menon said.

Bangalore and Hyderabad have broken even already while Chennai, Ahmedabad and Kolkata are expected to break even in the next two-three months, he added.

While SuperMarket Grocery Supplies is the wholesale products supplier, Innovative Retail Concepts runs the consumer-facing arm of the BigBasket property under licence from SuperMarket Grocery.

In 2016-17, net sales of Innovative Retail stood at Rs 1,090.49 crore, up from Rs 527.46 crore. Gross expenses rose four-fold to Rs 1,282.36 crore, up from Rs 630.97 crore in the previous financial year.

Alibaba’s investment will also give BigBasket the much-needed firepower to fight Amazon. The Seattle-based e-tailing giant recently got regulatory approval to set up a retail unit in the country to sell private food labels. Amazon has committed $500 million over the next two-three years towards this food retail unit. Amazon also offers online delivery of groceries and daily essentials through its app Amazon Now and its online supermarket service Amazon Pantry.

However, BigBasket might also face another formidable competitor in Flipkart, which announced its second innings in the segment through a soft launch of its grocery delivery service Supermart in November last year.

On Wednesday, media reports had stated that US-based offline and online retailer Walmart Stores Inc. was in advanced stages of talks to buy a significant minority stake in Flipkart.

Walmart could pick up as much as 15-20% stake in a deal which could materialise by the end of March. When the deal materialises, Flipkart could see an investment north of $1 billion.

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