Food retail heats up as Bigbasket gets government nod for FDI

Online grocery firm Bigbasket has got Indian government approval for foreign direct investment (FDI). Now, the firm can retail food products manufactured and produced in India.

The firm will have to create a new company to start this business since 100% FDI is only applicable for food products manufactured or produced in India, whereas currently BigBasket sells other household products such as soap, shampoos etc through its e-commerce channel.

Bigbasket had committed an investment of around Rs 100 crore. The start-up is yet to begin the work on finer details of the business plan, said Bigbasket’s co-founder Hari Menon.

The company had applied for FDI in September 2016. Earlier, Grofers and Amazon India got approval from the government. All three companies had seeked approval for FDI in food retail with an investment to the tune of $695 million over period of time with the Department of Industrial Policy and Promotion (DIPP).

A year ago, the government permitted 100 percent foreign direct investment (FDI) in the food processing sector. As per new rule, a foreign company can open a wholly-owned subsidiary in India to retail food products produced and or manufactured in the country by way of opening stores or online.

The government opening the food retail sector will see a lot of players entering the market. And of late, e-grocery space has been making headlines as e-commerce majors have shown strong interest in it. Amazon started online grocery platform Amazon Now last year, and currently operates in three cities- Bengaluru, Hyderabad and Gurgaon.

Flipkart and Paytm are also bracing up to get into grocery space soon. Paytm also reportedly in talks to buy stake in Bigbasket.

With 100 per cent FDI in food retailing, the government intends to encourage organised retailers to source goods directly from farmers and reduce the role of middlemen who usually eat-up major part of earnings and often inflate market prices.