Does BigBasket need to raise another mega round? Indeed, it has to

Fundraising efforts become continuous effort when business keep burning money to maintain market share and momentum. After raising $300 million from Alibaba, BigBasket is scouting for another mega round to fight Amazon and Walmart (via Flipkart).

While the Bengaluru-based company mentioned that it doesn’t require capital immediately, it is eyeing to raise $300 to $500 million as Flipkart and Amazon are likely to ramp up their grocery plays. According to a Mint report, the aforementioned amount could be led by Alibaba with participation from existing investors. New investors can also chip in.

But, the bigger question remains - does BigBasket require more capital and what happened to a staggering $300 million last round? Let’s understand the so far capital spent by BigBasket from the last round.

A major chunk $70-80 million went towards purchasing secondary share largely from Growth Story (Meena and K Ganesh). Approx $12 million had gone in paying the debt. BigBasket had raised over $9 million in debt from Trifecta Capital.

Entrackr’s sources outlined that BigBasket had a burn of about $8 million every month. We estimate that the burn rate must have gone up as its competitor Grofers also raked in $62 million from SoftBank.

Let’s assume that BigBasket currently has a monthly burn of $10 million while it raised last round at the beginning of February. Since then, the company has burnt about $30 million in the operation. It had over $180 million left in the account, which covers approx 18 months runway for the company with the current monthly burn.

However, monthly burn sets to escalate as Flipkart and Amazon would likely to deploy a lot more capital for grabbing a larger market share. Indeed, after acquisition by Walmart, Flipkart will have a sharp focus on grocery.

Besides fighting large horizontal players and Grofers, BigBasket is also eyeing to open kiosks and offline store and start subscription service on the lines of Milkbasket and Dailyninja. These initiatives will come with additional burns.

Meanwhile, the company is also sprucing up the supply chain to make it efficient for facilitating deliveries in a few hours or same-day delivery.

Since Walmart has a core competency in grocery, it’s slated to strengthen grocery vertical for Flipkart. Importantly, sales from regular e-commerce categories such as smartphones and electronics is not growing as it used to be. The stagnation in aforementioned categories is leading Flipkart and Amazon to evangelise grocery seriously.

While Bigbasket may not require additional firepower (capital) at the moment, it certainly has to raise a mega round to maintain as well as grow its lead over Flipkart, Amazon, and Grofers. And, yeah, Alibaba wouldn’t mind leading another round.