BigBasket raises $150m in funding, targets profitability this year

Supermarket Grocery Supplies, which owns and runs BigBasket, has closed $150 million in funding led by Mirae Asset-Naver Asia Growth Fund, Alibaba and UK government-owned CDC Group, cofounder Vipul Parekh confirmed to ET. The latest funding propels the online grocery platform’s valuation to over $1 billion. 

The financing deal was first reported by ET in its February 8 edition.

The company has allocated $100 million in capital expenditure to build infrastructure, technology and supply chain, Parekh said. 

BigBasket will operationally break even in six-eight month once it hits the $800-million revenue run rate, he said. The idea is to optimise supply chain, technology, reduce logistics costs and improve margins from its fresh and wholesale business. 

Over the last 12 months, the company has launched new business including vending machines, and milk subscription and categories including beauty and fresh meats, which will both scale up this year. 

“Grocery is a business of scale, and our defensibility lies in our farm-to-fork supply chain of fresh fruits, vegetables, meats, and inventory-led wholesale approach, which helps us with high order fill rates,” he said, adding that about 70% of the company’s sales come from its flagship ecommerce portal BigBasket, and it also supplies to other businesses including hotels, restaurants as well as offline retail brands. “We will expand our reseller network this year,” he said 

The fresh capital gives BigBasket, which competes with the likes of Amazon, Flipkart, Swiggy and Grofers, additional firepower to fight out top internet marketplaces that are aggressively pushing into the grocery retailing business. While Flipkart and Amazon have introduced grocery as a category and launched their own private labels, they have steered away from fresh foods. Grofers, which until last year was the closest rival to BigBasket, also pivoted to focus on a private label- model, while Swiggy and Dunzo continue to pilot grocery as one of their business verticals by aggregating neighbourhood stores. 

Grocery has been regarded as the next big category in ecommerce — but it is also one of the most complex ones to crack. This year, BigBasket plans to invest in reengineering its supply chain, which includes setting up more distribution centres across cities to cut delivery times to the same day for 80% orders by July. 

“For instance, in Bengaluru, we had 10-12 dark stores, which will now become 30,” Parekh said. “Earlier, we sourced 50-60% directly from farms in 48 hours. Soon, we will hit 90% of farm-sourced produce with a lead time of 24 hours,” Parekh added. BigBasket’s private label, which includes fresh produce, contributes to about a third in business. 

This has been a major reason for CDC’s interest in the e-grocer, according to CDC’s Srini Nagarajan. “The key to CDC’s investment approach is creating a meaningful difference in people’s lives by backing businesses that fuel job creation to support economic empowerment within communities,” he said. “For fiscal 2018, BigBasket’s revenue went up 35% to Rs 1,605 crore, while losses narrowed by 60% to Rs 272 crore, according to regulatory filings. Parekh said he expects total costs to by an additional 20% this year. “By the end of this year we will become contribution positive, we are already cash flow positive- which is a milestone in grocery retail online and offlline,” he said. 

Newsletter Subscription

Sign Up to enjoy top Finance Articles and Insights Delivered to your inbox.
  • Programic Asia Pvt Ltd may keep me informed with eMails about cfoengage.com & finance newsletters. See our Privacy policy for more details