Alibaba to Invest in Indian Online Grocer Startup

Arthur James December 08, 2017
Alibaba to Invest in Indian Online Grocer Startup

Alibaba Group Holding Ltd. is going to invest about $200 million in India’s largest online supermarket, BigBasket, leading a $280 million funding round in the startup.

Alibaba is taking a stake of about 25 percent 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 Inc., which in June agreed to acquire U.S. grocer Whole Foods Markets Inc.

The Bigbasket deal is waiting for approval from the country’s antitrust authority, the Competition Commission of India. It is now seen as a formality and expected to come through any day. BigBasket and Alibaba did not respond to emails seeking comment on the new funding.

The investment indicates an increasing 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 Pvt. Alibaba has invested in One97 Communications Ltd., which runs digital payment and e-commerce businesses.

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

Grocery and daily essentials is a challenging business the world over, even in advanced markets like the U.S. and China. BigBasket, owned by Innovative Retail Concepts Pvt, runs in a country where expansion is difficult beyond the big cities because of basic logistics and a shortage of refrigerated trucks and warehouses.

Growth will require capital expenses, and Amazon received government approval earlier this year to invest $500 million into food retailing. Several high-profile grocery startups have fallen over 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 repetition.

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Arthur James


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