Big Basket Van

Deal View with Rishi Maheshwari: Big Basket

Abraaj has further strengthened its partnership with India’s leading e-grocer Big Basket through its participation in the follow-on fundraising round. We speak to Abraaj Managing Director Rishi Maheshwari on Big Basket’s expansion in India and why he thinks the modern retail and e-commerce sectors make a compelling investment proposition.

Q: Abraaj has been an investor in Big Basket since March 2016. How has the company grown over the course of Abraaj’s investment?

Rishi Maheshwari: Abraaj led a US$150 million round of fundraising for Big Basket in 2016. Since then, we have leveraged our expertise in the consumer discretionary and e-commerce sectors to support Big Basket in enhancing its market leading position, improving its sourcing capabilities and launching specialty delivery services to hotels, restaurants and caterers.

As the company expanded to cover 24 cities across India, operations have been sustainably scaled to meet its growing needs. Strategic thinking went into driving cost-effective customer acquisition, customer retention, procurement with local farmers and other producers, supply chain integration, technology improvement, data analytics and so on.

Q: Abraaj recently participated in the follow-on fundraising round for Big Basket. What makes the business an attractive investment?

Rishi Maheshwari: We are very pleased to further strengthen our partnership with Big Basket. Since it was founded, Big Basket has pioneered the online grocery concept in India, reshaping the grocery retail landscape.

The company today serves customers across 24 Indian cities. Over the years, it has innovated its offerings, penetrating into the private label business, as well as launching its own branded products which has delivered high growth for the business. The company has also made significant investments in building its operational, supply chain and technological infrastructure in a highly capital efficient manner.

It is this strategic thinking and exceptional execution capabilities that set Big Basket apart. Given the overall potential market size, the growth opportunity is clear for Big Basket: to continue deepening its presence and growing its business lines. We are excited to work with the company in its next phase of growth. 

Q: In India, e-commerce is making headlines as more traditional sectors are going digital. Can you give us a snapshot of the opportunity and what this means for investors?

Rishi Maheshwari: We are seeing a sharp increase in online penetration throughout growth markets and this is helping to fuel a boom in e-commerce. To better understand the opportunity, we observe demographic trends, buying behavior and the growth of e-commerce “enablers”. 

In this context, India has a large aspirational population, increasing smartphone and internet penetration, and is experiencing a drop in internet and data access costs. India’s internet base is second in the world behind China, with approximately 800 million unique mobile users and 430 million people with internet access. And this number is growing. It’s no surprise that many global companies are tapping into India’s market, for example, Amazon and Alibaba.

When we look at e-commerce itself, people are becoming more comfortable transacting online. And for those who are not, e-commerce sites offer Cash on Delivery (CoD) services, which has enabled the sector to widen its reach. The food and grocery market (F&G) accounts for 68% of total retail sales, making this the largest area of consumption in India. And as more people are buying online, the opportunity for online grocery is clear.

As a global trend, consumers are looking for more convenient ways of shopping. Businesses are responding accordingly, as evidenced by the conversion growth from offline to online. That makes the e-commerce sector a compelling investment proposition.

Follow @AbraajGroup on Twitter or The Abraaj Group on LinkedIn for insights on the trends that are shaping our markets, industries, sectors and businesses.