Tata Digital Plans INR 5K Cr Fundraise To Fuel Super App Plans

As it prepares to take over online grocery unicorn BigBasket, Tata Digital, the digital businesses arm of Tata Sons, is looking to raise INR 5,000 Cr through a commercial paper issue.

Besides BigBasket, Tata Digital is looking to acquire a majority stake in online pharmacy and healthcare platform 1mg after investing an initial amount of $13 Mn. It is also reported to be mulling a strategic investment in publicly-listed online hyperlocal services platform Justdial. The company’s 64% acquisition of BigBasket has already been approved by the Competition Commission Of India. The acquisition is said to be worth INR 9,300 Cr (or $1.2 Bn).

Now, as it looks to make deeper inroads into the ecommerce business and launch its super app, Tata Digital is looking to raise funds for platform development and operational expenses, according to India Ratings and Research, which has rated the commercial paper as ‘A1+’. The ratings note also said that Tata Digital is expected to launch is ecommerce super app platform “in a timely fashion” with most of the Tata Group’s flagship consumer brands on board.

Usually not backed by any form of collateral, a commercial paper (CP) is an unsecured money market instrument issued in the form of a promissory note. According to SEBI, the minimum credit rating of the companies seeking commercial paper must have the minimum credit rating of A-2.

“Ind-Ra expects TSL (Tata Sons) to infuse sufficient equity upfront or in a timely fashion so as to keep leverage level at TDL under check. In the long-term, Ind-Ra expects TDL to garner a meaningful user-base with adequate revenue generation potential, which would maintain TDL’s strategic importance to TSL,” said the note, according to a Business-Standard report.

The proposed super-app will pit Tata against digital business conglomerates like Reliance Industries, Amazon and Walmart-owned Flipkart. Tata Group’s super app is expected to offer consumers a range of services —  food and grocery ordering, fashion and lifestyle, consumer electronics and consumer durables, insurance and financial services, education, healthcare and bill payments.

Tata Digital is also close to launching a marketplace as well a suite of enterprise tech solutions for small and medium enterprises (SMEs) in India to back its consumer-facing ‘super app’ play. The new entity called Tata Business Hub is being led by veteran Tata Consultancy Services (TCS) executive Venguswamy Ramaswamy, who is also the global head of the TCS business division that offers cloud-based IT solutions as a service to SMEs. The company was incorporated in October 2020 and offers a suite of digital marketing and customer engagement tools built by TCS on its platform called nexarc.