Tata Digital has often spoken about their plan to create a super app– where a consumer can access everything under one platform– and has made multiple moves in the last few months towards this.

A graphic of a phone held with Tata logo and 1mg, bigbasket and curefit logos in the background
Money Super App Thursday, June 10, 2021 - 13:12

After Tata Digital invested in BigBasket, Curefit and 1mg, reports suggested on Wednesday that hyperlocal delivery platform Dunzo could be its next big bet in its journey to build a super app– a deal that could value Dunzo at $150-200 million. However, Dunzo denied any such talks, saying it is growing at an unprecedented rate.

"In fact, we’ve doubled our business in the last 75 days and continue to grow 50% month on month. While we are currently in advanced discussions with multiple investors on raising additional capital to the tune of $150-200mn, a buyout or sale of controlling interest is definitely NOT up for discussion at this time,” Dunzo said in a statement. Dunzo recently raised $40 million as part of its Series E funding round.

The Tatas have made their ambitions in the digital space quite clear. They have repeatedly spoken about their super app plans, taking on other major e-commerce players — primarily Reliance, who is also on a similar path.  The idea of a super app — where a consumer can access everything under one platform — is not new. It’s been tried by multiple companies in many parts of the world, including India, but no one has been successful to the degree Tencent’s WeChat was in China.

In India, it has been attempted before by multiple companies such as Hike (which later decided to unbundle the apps). In a 2020 interview to The Hindu Business Line, CEO Kavin Bharti Mittal had said that the super app is not what customers want, stating that they want the best user experience. “It is always a business-first mentality when people want to build a super app as they want to control all the customers. But customers don’t necessarily want that,” he said. However, this has not stopped companies such as Tata, Reliance, IPO-bound Paytm, as well as Amazon and PhonePe from making that play.

After announcing its super app intentions in mid-2020 (launch timelines have now been delayed), Tata Sons Chairman N Chandrasekharan told BusinessToday that the app plans to have categories such as electronics, groceries, fashion and lifestyle, beauty, travel, health, education, and entertainment, as well as to bring various Tata brands under one umbrella.

By acquiring the dominant e-grocer platform BigBasket last month, Tata Digital has already added grocery to its cart. Pratik Pal, CEO of Tata Digital, in a statement at the time, identified grocery as one of the largest components of an individual’s consumption basket in India and said that BigBasket fit in perfectly with their vision of creating a large consumer digital ecosystem.

This was followed by an investment of up to $75 million in Curefit, a dominant player in the fitness and wellness industry. “The CureFit partnership with its industry-leading platform in fitness and wellness aligns very well with our overall healthcare proposition where fitness is increasingly becoming an integral part of a consumers’ life,” N Chandrasekaran said. 

The deal will also see CEO Mukesh Bansal taking a role at Tata Digital. “With his (Mukesh Bansal) deep consumer experience and an entrepreneurial mindset of having incubated and grown two very successful businesses, his expertise will bring immense value to us,” N Chandrasekaran added.

Reports state that like Mukesh Bansal, BigBasket founder Hari Menon too is expected to continue in his role.

Tata Digital has also acquired a majority stake in 1mg. In a statement, Tata Digital said the investment is in line with its vision of creating a digital ecosystem "which addresses the consumer needs across categories in a unified manner".

"e-pharmacy, e-diagnostics and tele-consultation are critical segments in this ecosystem and have been among the fastest growing segments in this space, as this sector enabled access to healthcare through the pandemic. The overall market is around $1bn and expected to grow at ~50% CAGR driven by increased health awareness among consumers and greater convenience.  This category will form a key element of the Tata Digital ecosystem offering," it said. 

And now, an investment in Dunzo, even if not for a controlling stake, could add value to Tata Digital’s super app play with its real-time delivery model.

Madhukar Sinha, a founding partner at India Quotient, says that in roughly 10-15 years from now, grocery delivery may be commonplace and a very large market, but if Tata does acquire a player like Dunzo, it can be more horizontal. “BigBasket gives them a foothold only in grocery, but is not as real-time as needed,” he adds.

“Tata is preferring companies which have more traction. They are looking to buy businesses where there is some value. Reliance is more interested in finding good quality talent, which is in the relevant spaces, and are going in and acquiring them and then eventually absorbing all of that talent to launch their own plans. The Reliance plan is more in-house and organic, whereas the Tata plan looks more like integrating and inorganic — acquiring and merging and making it work,” he says.

A player like Dunzo makes sense for the Tatas, given delivery timelines, Sinha believes. They acquired some logistics with BigBasket and potentially with 1mg, but there is nothing immediate, which is what Dunzo could bring to the table.

“Today, the decision of buying something offline or online is largely dependent on how much (time) you're willing to wait for it,” Sinha says.

Even if Tata doesn’t acquire a controlling stake in a company like Dunzo, Sinha says a strategic investment could make sense.  “The intent of Tatas is to have those companies, the founders, and the team to stick on and build for Tata. Therefore, a good investor will not be very greedy today. They will say that let me put some money, and build more relationships. At the right moment, maybe, they will be able to nudge them to join the whole larger scheme of things, which they have. That's also possible,” he says.

For Dunzo, this could be a long-term play of sustainability. Sinha says that it is not easy to make money in a delivery-led business in the country given the low average revenues per user.

“This is why it makes more sense to think about players who can build more horizontal use cases of delivery,” Sinha says. 

Read: Dunzo sees 350% growth in medicine orders since January 2021

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