MUMBAI (NewsRise) -- Indian online grocery retailer BigBasket received funds worth $150 million from Alibaba Group and other global investors, signaling the rebound in interest in south Asian nation's online startups.
Venture investments in India start-ups slowed down over the past quarter as investors remained cautious of the regulatory changes in the country. The government had, in December, overhauled the foreign investment rules for the country's fast-growing e-commerce sector that curbed online retailers from selling products of companies in which they have equity interest.
The move disrupted the business models of large online retailers such as Amazon.com, which was forced to take down a host of products, including their key grocery service. Amazon has since resumed sales of many of those products. Venture funding into Indian startup companies slipped 8.7% sequentially to $2.1 billion in the first quarter of 2019, Jefferies said in a report last month.
Globally, too, venture capital funding declined during the quarter amid an uncertain economic climate.
On Monday, BigBasket said it received funds from a host of investors led by South Korea's Mirae Asset-Naver Asia Growth Fund, the U.K.'s CDC Group, and existing investor Alibaba Group. The investment will be used to scale up its supply chain network and developing new reseller channels, the company said in a statement.
The investment in BigBasket underscores the sustained investor faith in promising sectors such as groceries that offer strong potential for high-margin private labels and are frequently used, say analysts. According to CLSA, online grocery retail in India can grow to $99 billion over the next decade.
The scope of online grocery retail spurred the entry of new players such as Swiggy, India's fastest growing food ordering and delivery company, into the sector earlier this year. Naspers-backed Swiggy, which was piloting a grocery delivery service in northern India, in February said it plans to launch the service across all major cities in the country.
Swiggy, which raised $1 billion in December from China's Tencent Holdings and Naspers, is expected to use a part of the funds for its expansion into grocery service. India's largest e-commerce company Flipkart Internet in August entered the sector with the launch of Supermart brand.
In March, Grofers, a smaller online grocery company, saw Japan's SoftBank investing $60 million.
"There is no sign of slowdown as far as the investments in food and grocery e-commerce is concerned," said Arvind Singhal, managing director of retail consulting firm Technopak Advisors. "Investors have already exhausted the potential in terms of rapid growth in areas such as consumer electronics, mobile phones, fashion clothing, and footwear. They are now shifting focus to the next biggest category -- food and grocery."
Food and grocery account for nearly half of the $800 billion consumer spending in India, Singhal said.
--Dhanya Ann Thoppil