Godrej Nature's Basket buys online grocer Ekstop.com

The acquisition is valued at around Rs30-40 crore and will include Basket taking on debt of Rs10-15 crore on the books of ekstop.com

Mumbai: Godrej Nature’s Basket, the premium food retailer owned by the Godrej Group, has acquired online grocer ekstop.com, joining a trend in which physical stores are seeking to tap rising demand for shopping on the Internet, according to two people familiar with the development. The deal value is around Rs.30-40 crore and will include Godrej Nature’s Basket taking on debt of Rs.10-15 crore on the books of ekstop.com, said one of the two people, adding that the final details will emerge next month. Both people spoke on condition of anonymity.

Negotiations on the deal were completed in January and Godrej Nature’s Basket is working on how to rebrand and integrate ekstop.com to serve as its online platform, the people said. The management of Ekstop will remain on board with Godrej Nature’s Basket and by 15 March the new online platform will be launched, said the first person cited above. The transaction comes as so-called brick-and-mortar retailers—those with physical stores that deal face-to-face with consumers—restructure their operations to make online retailing a core offering to tap the growing e-commerce market in India.

Modern retail in India is expected to grow three times to $180 billion in 2020 from $60 billion in 2015 and e-commerce at an even faster clip to quadruple in the same time to become a $60-70 billion market, Boston Consulting Group and Retailers Association of India forecast in a February report titled Retail 2020: Retrospect, Reinvent, Rewrite. A slowdown in discretionary spending and operational issues such as high rentals and limited real estate options is another reason why most physical retailers are now strengthening their online presence.

In the financial year 2014, Godrej Nature’s Basket had posted a loss of Rs.31.32 crore compared with a loss of Rs. Rs.27.74 crore in the previous year. Revenue increased by 36% to Rs.174.35 crore from Rs.128.04 crore in the year earlier as the retailer opened new stores, according to documents submitted to the Registrar of Companies. Ekstop.com, which has operations in Mumbai, Navi Mumbai and Thane, reported a loss of Rs.63.7 lakh on revenue of Rs.3.93 crore for the financial year 2014, according to documents submitted to the Registrar of Companies.

“We can’t comment on speculations,” said Mohit Khattar, chief executive officer, Godrej Nature’s Basket, when asked for comment. He added that the company is exploring various options for growth and these could be online or offline. Sumat Chopra, co-founder of Buy Daily Retail Pvt. Ltd, which runs Ekstop.com, also declined to comment. “Ekstop.com is no longer operational as it has been acquired by Godrej Natures Basket,” said the second of the two person cited above.

According to a message on the website of ekstop.com, the portal is being upgraded to bring “thousands of more products, faster same-day delivery and other exciting services and updates that will amaze our customers. We will be in several more cities this upcoming year of 2015. Ekstop will be ready to serve the customers in an all new upgraded form shortly. Meanwhile, we sincerely apologize for any disruption in service over the next few days.” Godrej Nature’s Basket is present in Mumbai, Delhi, NCR (National Capital Region), Pune, Hyderabad and Bengaluru with 32 stores. The retailer also provides same-day home delivery in the five cities through its website.

In January, Godrej Nature’s Basket also tied up with Snapdeal and made 700 products available on the Snapdeal marketplace. The Internet will influence one-third of the total sales in the consumer packaged goods sector in the next five years, according to a February report by Bain and Co. and Google Inc. India’s Internet users are expected to increase from 300 million in 2015 to over 650 million by 2020. As such, the number of online shoppers will also grow from 35 million currently to over 250 million by 2020, said industry experts.

Earlier this month, Mahindra Group, which operates Mom and Me, a baby and infant products retail chain, acquired Mumbai-based start-up Nest Childcare Services Pvt. Ltd’s e-commerce site for baby-related products, Babyoye.com. “Offline brick and mortar will look for companies in the online space more actively as building these companies requires a different DNA,” said Ashish Bhide, executive director, Avendus Capital Pvt. Ltd. In the past, Future Group, the parent of listed retail companies like Future Retail Ltd and Future Lifestyle Fashions Ltd, which runs Big Bazaar and Central department stores, launched its website futurebazaar.com with much fanfare, but shut it down after it made a loss of Rs.300 crore, Future Group CEO Kishore Biyani said at a retail industry event this month.

Nevertheless, Biyani is keen on building the company’s presence online. Future Group has a partnership with Amazon India for selling the group’s private labels and has also planned an investment of Rs.100 crore for rolling out its so-called omni-channel retail strategy. “The coming year will see consolidation in the online space.. We could also see an offline company buying an online company,” said Biyani at the same conference.

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