Tata Digital seeks additional funds from Tata Sons for digital expansion

Mumbai: Tata Digital has sought additional funds from the holding company, Tata Sons to support the growth plans of its ambitious digital retail initiative as negotiations with global firms are somewhat delayed because of geo-political issues. The wholly owned subsidiary of Tata Sons is understood to have sought working capital funds in recent weeks, officials close to the development said.

The group is expected to make an what is being described as an “interim investment” of around $500 mln as Tata Digital needs to expand aggressively in order to take on entrenched incumbents like Amazon Inc, Wal-Mart, besides Reliance Group’s Jio platforms. “This fund infusion of $500 million would be done in multiple tranches,” said a person familar with the matter.

Tatas have been in talks for some time with global investors, including some sovereign and pension money managers, to fund its digital foray.

However, investors appear to be reluctant to commit funds until clarity emerges on the consumer response to the official launch of the Super App — called Tata Neuto— which is now expected to be in April 2022.

The App is currently being tested amongst Tata employees who have also been asked to rope in extended family members to test the App for a detailed feedback.

Tata Digital has estimated a valuation $ 18bn plus for the digital entity, which includes Big Basket, online pharma store 1 mg, Croma and Tata Cliq. Investors are however keen to assess the scale of revenues or gross merchandise value that Tata Digital can offer within a year if operations.

“Some of the sovereign and pension funds were looking to participate in the funding round as co-investors and not as lead investors. So, Tatas wanted to finalise the anchor investor part first to get larger capital access from financial investors,” said one of the sources mentioned above.

When contacted, Tata Sons did not comment.

A bunch of long-term investors including Canada Pension Plan Investment Board, Singapore’s Temasek Holdings, SoftBank Group, Abu Dhabi investment Authority and two European money managers were among those approached for a potential deal, ET reported in August last year. Investors have asked for more details on the operational structure of Tata Digital and its integration plans with existing retail operations of the group such as Trent and Titan, top officials close to these funds said.

The take off plans for Tata Digital including, scaling up of logistics and back-end supply chain needs substantial funding. Tata Sons may be constrained in its ability to shell out funds on a sustained basis as it would have to support funding requirements of other group entities. Tata Sons chairman N Chandrasekaran is understood to be personally wooing investors, officials said.

Chandrashekharan’s re-appointment last month as chairman of the group will further strengthen Tata’s digital strategy as the former TCS chief is expected to play a significant role . Currently, Tata’s digital strategy is being spearheaded by TCS veteran Pratik Pal, CEO of Tata Digital for nearly three years, along with Myntra and Cure.fit co-founder Mukesh Bansal.

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