Alibaba's twin investments: BigBasket gets $200 mn and $150 mn for Zomato

Info Edge India said it will sell 6.7% stake in food delivery firm Zomato to Ant Financial, Alibaba Group Holding's payment affiliate, for $50 mn

Chinese Internet giant Alibaba Group is shoring up on its investments in India’s e-commerce space leading a $200 million funding round in online-grocer BigBasket and has signed a pact with Zomato to pump $150 million into the online food ordering company.

Alibaba led the Rs 12.6-billion ($200 million) investment in BigBasket fronting nearly 75% of the capital, while existing investors Abraaj Group, Sands Capital and International Finance Corporation have put in the rest. The money is said to be part of a $300-million round the Bengaluru-based company is raising as part of its Series E round.

With the capital, BigBasket will take on giants Amazon and Flipkart, which are vying to grow their presence in the online grocery space. Both e-commerce marketplaces consider the grocery category as critical in getting their existing customers to shop more often on their respective platforms.

While Alibaba directly invested in BigBasket, the company’s financial services arm Ant Financial has signed a pact with online restaurant discovery and food ordering platform Zomato to invest $150 million. InfoEdge, the largest shareholder in Zomato, notified the stock markets on February 1 that it would sell 6.7% stake in Zomato to Ant Financial for $50 million.

Once the $150-million deal is completed, InfoEdge’s shareholding in Zomato would drop to 30.9% from the current holding of 44.7%. The deal would value Zomato at around $750 million, a quarter of a billion short of being a Unicorn (a private company that is valued at over $1 billion).

Zomato will utilise the capital to combat its two largest rivals Swiggy and Foodpanda, with the latter having a commitment from new owner Ola to receive a $200-million investment over the next few years. Experts say India’s food ordering space could soon see another boom where cash flush companies shower customers with discounts to win them over and increase their market share.

Alibaba and Ant Financial are slowly building up a portfolio of Indian Internet companies, with the largest being Paytm whose valuation is now being pegged at $10 billion. The company is at war with Chinese rival Tencent, which is looking at few but large strategic deals in India. Tencent has so far invested $700 million in Flipkart, $400 million in Ola, apart from smaller investments in Hike and Practo.

Investments from the East have slowly eclipsed investments in Indian Internet companies coming from the West. Softbank, Alibaba and Tencent are leading mammoth rounds in some of India’s leading e-commerce firms as they try to combat giants such as Alibaba and Uber from cornering the market here.

Amazon, which is vying to beat Flipkart and become the defacto online shopping destination for Indians has responded to this threat by pumping in over $1 billion into its India marketplace in the current financial year. With online shopping pegged at just $33 billion, all players are more than willing to pump in multiples of what they’ve already invested as they expect the online market to someday compete in size with the markets in China and the US.