Stake Acquisition – Dutch Uncles https://dutchuncles.in Market Intelligence & Mentoring Resources for Startups and Small businesses | Dutch Uncles Thu, 18 Feb 2021 17:56:53 +0000 en-US hourly 1 https://dutchuncles.in/wp-content/uploads/2020/12/favicon.png Stake Acquisition – Dutch Uncles https://dutchuncles.in 32 32 Tata’s Strategy to Stronghold the E-commerce Market https://dutchuncles.in/discover/tatas-strategy-to-stronghold-the-e-commerce-market/ https://dutchuncles.in/discover/tatas-strategy-to-stronghold-the-e-commerce-market/#respond Fri, 19 Feb 2021 00:35:05 +0000 https://dutchuncles.in/?p=15127&preview=true&preview_id=15127 The Indian conglomerate Tata Group will acquire a majority stake in the grocery distribution company BigBasket. The big umbrella giant will buy a 68% stake in BigBasket for around Rs 9,500 crore ($1.31 billion), pegging BigBasket’s estimated value between $1.8 and $2 billion. BigBasket raised more than $ 750 million before it sealed the deal […]

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The Indian conglomerate Tata Group will acquire a majority stake in the grocery distribution company BigBasket. The big umbrella giant will buy a 68% stake in BigBasket for around Rs 9,500 crore ($1.31 billion), pegging BigBasket’s estimated value between $1.8 and $2 billion. BigBasket raised more than $ 750 million before it sealed the deal with Tata. 

Tata has a dual strategy to modernize its digital sector model. In addition to working on acquisitions, the conglomerate is also discussing with potential investors the possibility of participating in a digital platform for its existing business arms.

The Bangalore-based start-up BigBasket competes with other giants of the industry, namely Grofers and Reliance’s JioMart. BigBasket functions in more than two dozen cities in India, and it became profitable during the coronavirus outbreak when sales peaked on the platform. Over the years, BigBasket has developed its internal line of essentials, an initiative that has helped improve profit margins.

As Tata Digs in BigBasket, Indian E-commerce Race Heats Up

The Tata Group, with $113 billion in sales and a wide range of brands that include Jaguar, Land Rover and Tetley Tea under its ambit, is investing in local e-commerce resources as the race for occupying the Indian e-commerce sector is intensifying. Where billionaire Mukesh Ambani’s JioMart is toughening the market for Amazon and Walmart subsidiaries in India, Tata is aiming to potentially take over existing Indian firms to fill the gap with its competitors.

E-commerce Boom Accompanied with Added Urgency

The expansion of Mukesh Ambani’s RIL in the technology and retail sector added urgency to Tata’s designs for finding a route in the industry. The richest man in Asia, Ambani raised more than $20 billion in 2020 by selling a 33% stake of his e-commerce arm – Jio Platforms – to investors including Facebook Inc. Tata’s acquisition of BigBasket will enable the legacy conglomerate to enter the fastest growing sector in India.

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Tata has a dual strategy to modernize its digital sector model. In addition to working on acquisitions, the conglomerate is also discussing with potential investors the possibility of participating in a digital platform for its existing business arms.

Narrowing Chinese Stakes

Following the cross-border skirmishes in 2020, the Indian government’s restrictions made it difficult for Chinese investors to invest in Indian companies. Jack Ma, the Chinese business tycoon and former richest man in Asia, has a 27.58% stake in BigBasket. With the majority acquisition of BigBasket by Tata, Ma’s Alibaba and a handful of other investors, including the Abraaj group, will face an almost complete exit from the start-up.

Inroads in E-commerce – Tata’s Strategy for expansion

The e-commerce industry has seen a massive increase in sales during the pandemic. When Tata enters the sector with BigBasket, it will gain the company’s large customer base and use it for cross-selling, giving serious competition to large e-commerce companies like Amazon and Flipkart.

The terms of the contract between Tata and BigBasket reportedly state that BigBasket will be listed on the public market as early as next year. The two companies are in advanced negotiations, indications of which have emerged since two-thirds of the preceding financial year.

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