In a development with wider ramifications for Indian ecommerce, Paytm Mall has started talks to invest $200 million for a substantial stake in BigBasket, India’s biggest e-grocer.
Three sources with knowledge of the negotiations have confirmed this to FactorDaily.
Paytm Mall has started due diligence of the accounts and operations of BigBasket, owned by SuperMarket Grocery Supplies Pvt Ltd. “(Even) before the due diligence, Paytm (Mall) has offered $200 million to own a majority stake in BigBasket… The final agreement will be made only after due diligence process gets over,” said one source, who like the other two sources, wanted to remain anonymous.
Paytm Mall, a subsidiary of India’s largest digital wallet company Paytm, is a marketplace that competes with ecommerce market leaders Amazon and Flipkart. (Paytm’s other businesses are Paytm Payments Bank that also handles wallet services and Paytm, which offers loans, sells gold and other digital services including movie tickets, recharges, bill payments, among others.)
“(Even) before the due diligence, Paytm (Mall) has offered $200 million to own a majority stake in BigBasket… The final agreement will be made only after due diligence process gets over” — a source with knowledge of the negotiations
Grocery is a big attraction for ecommerce companies. Food and grocery put together is a Rs 23.03 trillion industry, and only 0.5% of that is online. By 2020, it is expected to almost double to Rs 54.20 trillion, and 2% of which will be online.
Partial or full acquisition, Paytm Mall will be directly competing with Amazon, which is flexing its muscles in the grocery space. Amazon has already applied to the government to allow it to store fresh fruits and vegetables to start inventory-led AmazonFresh in India.
Reports suggested that Amazon was earlier in talks with BigBasket, as the American ecommerce giant eyes the Indian online grocery market, and had signed a 60-day exclusivity agreement.
It is not clear that Amazon has withdrawn its interest in BigBasket or whether it is still in the fray for a big bang e-grocer acquisition.
Partial or full acquisition, Paytm Mall will be directly competing with Amazon, which is flexing its muscles in the grocery space
Paytm Mall is targeting two-hour delivery with grocery. BigBasket already has this feature, which comes at an additional cost. “Grocery is one end of the spectrum — very frequent buy, and of low value… The other end of the spectrum is electronics, which is high value and low frequency,” Amit Sinha, chief operating officer of Paytm Mall, had said in a separate conversation with FactorDaily.
Amazon runs its Amazon Now service in a few Indian cities that, too, has an option of delivery within two hours.
Rahul Hari, founder and CEO of Gurgaon-based e-grocery firm Satvacart called the latest development the “third wave” in online grocery and “it is here to stay”.
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The first wave was in 2011, Hari said. ZopNow, BigBasket, Local Banya, AtYourDoorStep and EkStop (acquired by Godrej Nature’s Basket) opened shop — all with an inventory-led model. In 2014, PepperTap and Grofers came in with a marketplace model. That, too, worked initially.
“Then there was rapid expansion, and that is a recipe of failure” said Hari. LocalBanya, AtYourDoorStep and PepperTap have shut down. Grofers stopped operations in nine cities. ZopNow pivoted into a managed marketplace for large grocery chains.
“The third wave is when the big boys comes and survive,” said Hari.
At one end there is Amazon. At the other end there is Paytm (backed by Alibaba and SoftBank). Flipkart, too, has started grocery.
Updated at 11.10pm on July 10, 2017, to add a links to related stories.