Tata Group Upcoming IPOs: Is Big Basket the Next Amazon of Groceries?

The Indian primary market is about to heat up, with big conglomerates Adani, Reliance and the Tatas preparing for some big bang IPO listing by 2025.

The Tata group has announced as many as 5 IPOs lined up in the next couple of years. Retail investors are now waiting with bated breath to see which company makes the first move and comes out with its IPO.

This comes after the fact that Tata technologies, the group's IPO after as many as 19 years, was a huge success, more than doubling investors' money on debut.

In today's article, we'll look at Big Basket's potential IPO by 2025 and its journey to profitability just months before the public offer.

About Big Basket

BigBasket (BB), the country's largest online food and grocery store, is gearing up for an initial public offering (IPO). The company is supported by Tata Digital, a subsidiary of the esteemed Tata group.

The Bengaluru-based company is enthusiastic about expanding its presence across India.

BigBasket has established itself as a household name in India's grocery sector. Founded in 2011, it currently operates in more than 59 cities in India. It is estimated to having handled over 15 million (m) orders per month.

The company's model provides an extensive selection of products such as groceries, fresh produce, etc. It efficiently manages procurement, supply chain, logistical, and subscription-based delivery services.

Founded by Hari Menon, the company embarked on a significant journey in 2021, with Tata acquiring the majority stake (64%) in the company.

Back in 2022, the company received an infusion of US$ 200 m, which valued the company at an impressive US$ 3.2 billion (bn) valuation.

Big Basket's Dark Stores

One of BB's key strengths lies in its innovative approach to serving customers. The company operates dark stores, and strategically located warehouses which enable rapid fulfilment of orders.

These dark stores support BB's various delivery formats such as BB Daily and BB Now.

The dark stores concept, as explained by its founder, is a hybrid model which combines an inventory-led wholesale approach and a hyper-local procurement strategy. BigBasket utilises dark stores for faster order shipping and express delivery services. It expanded its dark store network to smaller towns and cities.

The dark store delivery business model allowed BigBasket to deliver in unique formats.

• BB Daily/BB Now - 30 minutes
• Express delivery - 90 minutes
• Normal delivery (same day/next day)
• Maximum 3-hour delivery

BigBasket has been initiative-taking in enhancing its service offerings to meet evolving consumer demands. The recent rebranding of its slotted delivery service to 'BigBasket Supersaver' reflects the company's commitment to providing enhanced savings and speedy deliveries.

It offers an extra 5% discount on thousands of products and expands its 2-hour delivery promise to position itself as a preferred choice for online grocery shopping in India. With this, the company plans to increase its footprint in brick-and-mortar stores as well.

Big Basket's Financials

Coming to its financials, Big Basket has registered constant revenue growth backed by strategic investments.

The operating revenue of its B2B entity, Supermarket Grocery Supplies Private Ltd, shows a significant year-on-year increase.

BigBasket's Financials at a Glance

FY19-20 (Loss)	5.6 bn
FY20-21 (Loss)	7.1 bn
FY21 -22(Loss)	8.1 bn
FY22-23 (Loss)	15.4 bn

Data Source: Company

The company has been experiencing losses likely due to mounting advertising costs. It invested heavily in marketing and advertising campaigns.

Other factors can be employee expenses, logistics costs, competitive pressure, investment in technology and market expansion.

Big Basket raised US$ 200 million in FY22, which it will use to expand its operations nationwide. This move aims to strengthen its position in the market, competing against giants like Reliance Industries Ltd. and Amazon.

According to Tata Sons annual report, Supermarket Grocery Supplies, the B2B arm of e-grocery leader BigBasket reported an increased loss for the financial year ending 31 March 2023.

The company's loss widened from Rs 1.8 billion (bn) to Rs 2.2 bn in FY23. Despite the loss, the company recorded a turnover of Rs 22.6 bn for the financial year. In FY22, it had posted an operating revenue of Rs 17.1 bn.

The company's co-founder Vipul Parekh expressed aspirations to attain profitability within the next few months. He also expressed his concerns about the quick commerce segment, BB Now, which still requires some time to achieve profitability:

• 'Our slotted grocery delivery service is currently profitable, however, the daily business, called BB Daily is nearing profitability'.

The parent company of BB, Tata Digital which is part of the Tata Group, posted a 29% growth in its net profit to Rs 221.3 bn for FY23. While its revenue went up 45% to Rs 350.6 bn.

According to documents filed by the company with the Registrar of Companies (RoC), losses for BigBasket's business-to-consumer (B2C) arm, Innovative Retail Concepts, surged from Rs 8.12 bn to Rs 15.35 bn in FY23.

Competition, Challenges, and Opportunity

Big Basket aims to continue to innovate and expand its offerings, driven by its vision to redefine the grocery shopping experience in India.

However, the competition in the online grocery space is fierce, with players like Zepto, Blinkit, and Swiggy Instamart aiming for the highest market share.

Nevertheless, BB's strong market position, backed by Tata's support and strategic investments positions it favourably in the Indian markets.

BigBasket faced a couple of challenges in its supply chain operations. Inefficient order management, mismanaged inventory in the warehouse, and disjointed last-mile delivery challenges to name a few.

The lack of coordination between order processing, warehouse management, and last-mile delivery led to increased delivery times and created inefficiencies.

Its founder Menon has also expressed doubts about the quick commerce businesses that promises delivery within 10 to 15 minutes. The economics of such rapid delivery models simply do not add up in traffic-congested areas.

In Conclusion

Despite facing challenges in certain aspects of its business, BB's competitive presence strengthens a powerful brand identity. Moreover, investors should monitor how BB explores its expansion into offline retail and adjust its delivery strategies in response to market changes.

Looking ahead, investors preparing for BigBasket's IPO should conduct thorough due diligence considering both the company's strengths and potential challenges.

The assessment of its financial health, growth prospects, and strategic initiatives will help in making informed decisions about participating in this anticipated public offering.

Overall, the promising outlook and expansion plans of BigBasket aim to redefine grocery shopping in India.

Stay tuned to this space as we cover all the Tata group's upcoming IPOs in detail.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...