International Finance Corporation, the private-sector lending arm of the World Bank, will invest around $25 million (Rs 163 crore) to pick up an undisclosed minority stake in online grocer BigBasket.
This is IFC's first known bet on India's bustling e-commerce sector.
IFC said on Tuesday it will invest in Bangalore-based SuperMarket Grocery Supplies Pvt Ltd, the firm which is a wholesale products supplier to BigBasket and owns the brand. A separate firm, Innovative Retail Concepts Pvt Ltd, runs the BigBasket property under licence from SuperMarket Grocery.
The ownership of Indian e-commerce firms that operate through an inventory-based model is typically structured in this way to confirm to regulatory norms. Foreign investment in Indian retail e-commerce is not allowed.
IFC said its investment is part of an ongoing fundraising exercise but did not elaborate. The company's CEO Hari Menon recently said it had raised $50 million in a fresh round of funding led by existing investor Bessemer Venture Partners. He told The Times of India that the company had mandated Citigroup to raise about $150 million from new investors in a deal that would value the e-grocer around $1 billion.
The startup also counts investors such as Helion Venture Partners, Ascent Capital and Zodius Capital.
An email query to IFC seeking details on the development did not elicit any response by the time of filing this article. A BigBasket spokesperson clarified that IFC's investment is not part of the previously announced $50 million funding round but did not share any additional information.
The grocery retailer provides its services across nine cities in India – Bangalore, Mumbai, Hyderabad, Pune, Chennai, Mysore, Kolkata, Ahmedabad and Delhi-NCR. It has also started operations in an unnamed tier-II city in the last two months, and intends to expand to another 20 tier-II cities over the next two years.
It has more than 2,900 employees and third-party workers, of which almost three-fourths are blue-collar workers who are deployed across the supply chain in distribution centres/warehouses, buying, merchandising and new facilities setup.
The company has also rolled out a new service where it supplies groceries to mom-and-pop grocers, using its existing supply-chain operations on a daily or weekly basis. It positions itself as a distributor with a faster inventory management capability for these small store owners who are catered to by traditional suppliers and distributors once every 20 to 30 days.
BigBasket was founded by a team of five—Menon, V Sudhakar, Vipul Parekh, VS Ramesh and Abhinay Choudhari—in 2011. The team has both offline and online retail experience. It had earlier set up India’s first e-commerce site FabMart.com in 1999, and then established the Fabmall-Trinethra chain of more than 200 grocery supermarket stores in southern India. Trinethra was sold to Aditya Birla Group in 2006 and now operates under the brand name ‘More’.
The grocery delivery industry in India is witnessing a lot of investor interest for both inventory-based models such as BigBasket and delivery-only models like Grofers, PepperTap and ZopNow.
Other big horizontal e-tailers are also jumping into the grocery space with Amazon partnering neighbourhood kirana stores for faster local deliveries and Flipkart launching a new app for daily essentials last week.