By Chris Kay
Tata Group’s Bigbasket may list its shares within three years after the latest capital raising valued India’s largest online grocer at Rs 26,520 crore ($3.2 billion).
The profitable e-commerce firm, which is expanding its pan-India reach and generates about $1.4 billion in annual revenue, may choose to launch an initial public offering in 24 to 36 months, Chief Financial Officer Vipul Parekh said in an interview Wednesday at the company’s headquarters in Bengaluru. The firm, which this week announced it had raised Rs 1,658 crore ($200 million), is open to receiving more private capital before it lists, he added.
“We’ll head to public markets at some point in time,” Parekh said. “The right time to approach capital markets is when you have a stable, growing business, when you have reasonable confidence in your forward forecast and we have increasing profitability - the markets can be brutal.”
Several highly anticipated technology IPOs in India have floundered and seen a rapid erosion in market value amid investor concerns over valuations, rising interest rates and profitability. Recently listed payments firm Paytm and beauty e-retailer Nykaa are attempting to stem the relentless stock rout, underscoring the need for Bigbasket to strengthen its business model before going public.
Controlling about a third of India’s online grocery market, Bigbasket was acquired by Tata last year. The 154-year-old conglomerate is seeking to compete and catch up with sector giants including Amazon.com Inc. and billionaire Mukesh Ambani’s Reliance Industries Ltd., which are attempting to capture Indian consumers with a range of hyper-fast deliveries and cut-price offers.
Dark Stores
Set up in 2011 by five founders, including 58-year-old Parekh, Bigbasket will use the freshly raised funds to bolster its quick commerce arm and expand its countrywide footprint to cement its dominance.
Bigbasket will increase the number of dark stores supplying BB Now — it’s currently unprofitable quick commerce format which promises deliveries of household staples within 30 minutes — from about 200 to 300 outlets by March.
“A lot of our capex is really going into building out our dark stores,” said Parekh, who added that BB Now would likely become profitable “somewhere between six to nine months.”
Although online purchases account for just 2% of all grocery sales in India, they’re one of the fastest-growing segments in the country’s Rs 82.9 lakh crore ($1 trillion) in yearly retail spending. The nation of 140 crore people is also leading other markets in the adoption of fast delivery, according to Sanford C. Bernstein, which estimates that quick commerce’s share of online grocery sales is 13% in India, against 7% in China and 3% in Europe.
‘Crazy business’
But many of Bigbasket’s rivals earlier this year pared back or slowed their expansion into services that offer super-fast, but cash-burning, deliveries — some within 10 minutes.
“Customers love it — economically, it’s a crazy business,” Parekh said about the recent rush toward quick commerce. “Since we’ve been serving grocery for a long time, we know exactly where the pockets of demand are based on our data.”
Bigbasket wants to expand its network to 75 cities by March up from the 55 it’s in now. Anywhere between 80 to 100 towns could be added over the next year to the current tally of about 450 towns. A pilot with about a dozen brick-and-mortar shops, branded as Fresho, is also underway.
“The top 10 metros have got reasonable penetration now,” Parekh said. “But in the rest of the country, we’re still scratching the surface.”