BigBasket to deepen growth in existing cities with fresh $150-mn fundraise

Online grocer BigBasket has confirmed that it has raised $150 million (about Rs 1,040 crore) in a fresh funding round led by South Korean firm Mirae Asset. The UK government’s development finance institution CDC Group and existing investor Alibaba Group have also participated in the round, a company statement said.

TechCircle had reported the development in March and estimated that the investment will increase the Bengaluru-based company’s valuation to $2-2.3 billion.

Mirae Asset has invested $59.7 million in this round, filings with the Registrar of Companies (RoC) show. CDC Group contributed $40 million while Alibaba, BigBasket’s largest shareholder, put in $50 million.

SuperMarket Grocery Supplies Pvt. Ltd (SGSPL), which owns BigBasket, had achieved unicorn status in February last year when it raised $300 million in its Series E round of funding led by Alibaba. Though BigBasket had crossed $1.6-1.8 billion in valuation by TechCircle estimates at the time, a person close to the company had pegged it at $950 million.

BigBasket will use the capital from this round to penetrate further into its existing markets by investing more in first-mile delivery, scaling-up of its supply chain and for developing new reseller channels, the company said.

“We are re-engineering our supply chain to allow for faster delivery to our resellers and to reduce the time from farm to our customers. We are also scaling up the back-end supply chain for our new businesses, BB Daily, which delivers fresh milk and other fresh products and BB Instant, which creates a network of vending machines. This coupled with an expansion in our range of private label products will create a solid foundation for growth in both revenue and profitability,” VS Sudhakar, Big Basket’s co-founder, said.

Founded in 2011, the company currently operates in 10 metros and 15 Tier-II cities.

Once the latest transaction is completed, Alibaba will hold 26.26% stake in BigBasket, Mirae Asset will own 5.31% stake while CDC’s stake will stand at 3.54%.

“SGSPL offers a transformational and convenient experience to its consumers, which makes it a preferred grocery platform. As India moves towards organised retail that offers standardised quality, comfort and speed in the shopping experience, we firmly believe the BigBasket brand will continue to define this segment as a category leader,” Ashish Dave, head of India investments for Mirae Asset Global Investments, said.

Mirae Asset Financial Group has business interests in life insurance, securities and investment and venture capital with worldwide group assets under management exceeding $400 billion. Mirae Asset Global Investments (India) manages mutual funds worth over $4 billion. In India, it has invested in Shadowfax and ZoloStays. The investment in BigBasket marks the group’s largest investment in India.

CDC has been investing in India’s impact segment for over 30 years. It has committed more than $1.7 billion in the country and has been an investor, directly or indirectly, in over 300 companies.

Private equity firm Abraaj Group is currently the second-largest shareholder in the company with 17.16% stake. BigBasket’s other major shareholders include homegrown private equity firm Ascent Capital and venture capital firms Helion Venture Partners, Sands Capital, Bessemer Venture Partners and International Finance Corporation (IFC).

BigBasket’s big-ticket fundraise comes at a time when competition in the online grocery space has been heating up. Grofers, its main like-for-like rival, secured $60 million in a round led by Japanese conglomerate SoftBank in February. The Gurugram-based company raised the follow-on funding at a post-money valuation of $424 million.

Meanwhile, Walmart-owned Flipkart and US-headquartered e-commerce giant Amazon have also been aggressively expanding their grocery verticals.

Amazon offers online delivery of groceries and daily essentials through its app Amazon Prime Now, while horizontal e-commerce rival Flipkart has also been getting its hyperlocal service off the ground.

Amazon, which also owns a food processing and retail unit, resumed its grocery service after the online retail giant faced disruption from revised e-commerce norms which came into place on 1 February this year.

Flipkart CEO Kalyan Krishnamurthy recently stated that the company plans to invest heavily in groceries over the next three years and was exploring investments in or partnerships with offline grocery retailers.

In addition, food-tech unicorn Swiggy diversified its operations with the recent launch of a new hyperlocal service that offers home delivery of groceries and other daily essentials.

BigBasket

The grocery e-tailer operates in 30 cities and clocks Rs 200 crore in terms of monthly run-rate. At the time of the last funding announcement, chief executive Hari Menon had said that he wanted to bring this number to Rs 500 crore by March 2019, which would mean that the company would finish the financial year 2018-19 with a Rs 6,000-crore exit run rate.

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.

Direct sourcing from farmers is a part of BigBasket's business model. The company had earlier said it aimed to work directly with 3,000 farmers. It also has over eight million customers.

The company recently strengthened its business-to-business arm by expanding to the HoReCa (Hotels, Restaurants, and Caterers) segment and partnering with kirana stores in an effort to transform them into technology-enabled modern retail stores.

As part of its efforts to strengthen its micro-delivery operations, it acquired subscription-based e-grocery startup RainCan last October.

BigBasket’s wholesale business posted a 35% year-over-year rise in its operational revenues to Rs 1,583 crore from Rs 1176 crore for the financial year 2017-18. Also, SuperMarket Grocery Supplies Pvt. Ltd narrowed its consolidated net loss from Rs 659 crore to Rs 272 crore during the period.

Innovative Retail Concepts Pvt. Ltd, the retail arm of BigBasket, witnessed a 29% year-over-year jump in revenue to Rs 1,410 crore. Total expenses, however, increased to Rs 1,877 crore from Rs 1,516 crore during the period, a jump of 23%. The arm narrowed its losses 6% year-over-year to 179 crore for 2017-18.