Reports are rife in media that Chinese e commerce juggernaut Alibaba is vying for a minority stake in Bengaluru based online grocer player Bigbasket. Alibaba will invest in the online grocery player through its Indian e commerce subsidiary Paytmall. The Chinese e commerce behemoth owns nearly 50 percent stake in Paytmall.
According to reports, Paytmall is looking to invest nearly $200 million in Bigbasket, which would propel latter’s valuation to $900 million. The due diligence of this deal is said to have been already started. This investment will apparently offer Paytmall a formidable presence in the online grocery space and much needed fire power to compete against Amazon and Flipkart.
However, Alibaba backed Paytmall is not the only in the race that is vying for a stake in Bigbasket. Singapore’s sovereign wealth fund Temasek Holdings and China’s Fosun Group are also in the fray, according to people familiar with the ongoing development. Fosun Group is reportedly interested in making a small investment of $20 to $30 million through its venture capital arm Kinzon Capital.
Interestingly, Bigbasket was recently in talks with Amazon over stake sale. However, the negotiations broke down owing to differences over valuation. Amazon’s move to seek stake in Bigbasket must seen from the context of its ambitious strategy to go full throttle in the online grocery business. Earlier this month, the Seattle based e commerce giant announced that it would make $500 million investment in online grocery business.
In fact, online grocery industry is set for a big showdown this year, with Flipkart recently making foray into online grocery business through a pilot project that will run only in Bengaluru city. But online grocery business is not without its pitfall as profit margins in this business are wafer thin. Not surprisingly, several small players as well as big players backed by prominent VC firms were forced to shut their shops in last one and half year. The most prominent being LocalBanya and PepperTap.