Investments

Alibaba Follows Amazon’s Lead, Buys Grocery Store

Two months after news surfaced that China’s Alibaba wanted to make an online grocery play in India by investing in BigBasket, it appears the deal has finally been made official through a $300 million funding round, Reuters reported.

Alibaba reportedly became BigBasket’s largest shareholder by investing $146 million in the grocer through compulsorily convertible preference shares, BigBasket said in a filing to regulators in India. While other investors did purchase secondary shares, Hari Menon, the company’s chief executive, would not provide an ownership breakdown to Reuters — although he did say Alibaba is now the company’s largest shareholder.

In addition to Alibaba, Sands Capital, International Finance Corp and Abraaj Capital also participated in the round. With the funding, BigBasket plans to invest in technology, analytics, infrastructure and marketing. It also plans to roll out its service into more areas of the cities in which it currently operates.

BigBasket is also planning on signing a deal with Paytm E-Commerce, which runs Paytm Mall. If that deal comes to fruition, Paytm will become BigBasket’s payments platform, and the online grocery delivery service will be able to sell its products on Paytm Mall. Alibaba has multiple investments in India, including a stake in Paytm’s parent company.

According to Bloomberg, Bangalore-based BigBasket has been in negotiations with Alibaba for several months over this investment, the finalization of which comes on the heels of previous talks with U.S. eCommerce pioneer Amazon back in June 2017.

When it comes to the grocery race between these two global eCommerce giants, India is still anyone’s game. Amazon Founder Jeff Bezos has said that his company will invest $5 billion in the country as it competes against local rivals such as Flipkart and Snapdeal.

Growth can be a challenge in India, where logistics and infrastructure can put a cramp on expansion outside the larger cities. For example, food cannot be safely stored and transported without warehouses and refrigerated trucks, which are in short supply. The only way to change that is through significant capital expenditure, which is how Amazon plans to spend $500 million in the coming years.

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