Alibaba and SoftBank-backed Paytm is believed to be in discussions to pick up minority stake in online grocery retailer, BigBasket for about USD 200 million, according to sources. The due diligence is on and the deal could be finalised in the next few weeks, sources privy to the development said. They did not wish to be identified as discussions are still on and the deal has not been signed yet.
When contacted Paytm declined to comment, while BigBasket said: "This is completely untrue". With people becoming comfortable buying even milk and bread online, online grocery segment is projected to witness a strong growth over the next few years. According to a report by Franchise India, the online grocery market is expected to be Rs 2.7 billion market by 2018-19. Industry watchers believe that grocery would become bigger than electronics and fashion, categories that currently dominate online purchases.
However, grocery delivery is also a cash-intensive business as players operate on wafer-thin margins and often end up losing money on delivery. Players like Snapdeal-backed PepperTap has already shut shop. However, the action is set to return with US-based Amazons USD 500-million FDI proposal getting approved. There have also been reports of BigBasket being in discussions with Amazon to sell stake.
The sources said investing in BigBasket would help Paytm in further strengthening its play in the e-commerce space. Besides, it will also help the Alibaba-backed Paytm to take on Amazon, they added. BigBasket has raised over USD 200 million from investors including Abraaj Group, Bessemer Venture Partners, Growthstory, Helion Venture Partners, IFC and Sands Capital.