Tata Group Seeks $1.3 Billion for Digital Expansion
The Tata Group is set to raise $1.3 billion to bolster its digital ventures, specifically targeting its online grocery platform BigBasket and healthcare service Tata 1mg. Global investment banks Citi and Moelis have been appointed to facilitate this capital raise, which aims to enhance the conglomerate’s competitive edge in the fast-paced quick commerce and online healthcare markets. The funding is crucial as Tata seeks to catch up with more aggressive competitors in these sectors.
Funding Allocation and Strategic Goals
Of the total $1.3 billion, $1 billion is designated for BigBasket, which has recently shifted its strategy to aggressively expand into the quick commerce space. The remaining $300 million will support Tata 1mg, the group’s digital health platform. Both companies operate under the Tata Digital umbrella, which has seen significant investment from Tata Sons. The group has expressed concerns about BigBasket’s performance relative to competitors like Blinkit and Zepto, prompting a renewed focus on profitability and market share.
Tata Group Chairman N Chandrasekaran has emphasized the need for tangible results from these investments. A senior official noted that while BigBasket is viewed as a mature business, it must adapt quickly to market demands and capitalize on previously overlooked opportunities. The group has already invested over $2 billion into the Tata Neu superapp, which has not met performance expectations.
Investor Outreach and Market Position
The Tata Group is currently reaching out to potential investors, including Canadian pension funds and Asian sovereign funds like Temasek, which have no conflicting interests with competing retailers. While some investors are looking for an exit, an initial public offering (IPO) for BigBasket is not anticipated in the near future. BigBasket, in which Tata holds over 65% ownership, was last valued at $3.2 billion. Its quick commerce service, BB Now, currently accounts for 80% of its orders but only captures a 10% market share in that segment.
To enhance its offerings, BigBasket plans to unify its services across various Tata brands, including Croma, Zudio, 1mg, and Carat Lane. The platform is also set to begin selling prescription medications through its app. In the fiscal year 2024, BigBasket’s revenue from operations rose by 6.27% to ₹10,061.9 crore, with losses decreasing by over 20%. The company aims to achieve ₹12,400 crore ($1.5 billion) in total sales for fiscal year 2025.
Performance of Tata 1mg and Future Plans
Tata 1mg has also shown promising growth, with a 20% increase in revenue to ₹1,968 crore in fiscal year 2024. The platform’s losses have significantly reduced, dropping by 75% to ₹313 crore, according to filings with the Registrar of Companies. Tata Digital holds a 63% stake in 1mg, which has attracted investments from notable entities such as Sequoia Capital, Intel Capital, and the Gates Foundation.
Looking ahead, Tata 1mg plans to expand both its express delivery network and its physical presence in the market. The strategic focus on enhancing digital health services aligns with the growing demand for online healthcare solutions. As the Tata Group navigates this competitive landscape, the successful execution of its funding strategy will be critical to its long-term growth and market positioning.
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