Tata Sons seeks to plough at least $2 bn into ambitious super  app

TataNeu, which is still in the testing phase, is expected to launch nationally early next year. It is designed as a single-point digital doorway to the Tata group’s various consumer offerings, including healthcare, food and grocery, financial services, fashion and lifestyle, electronics, over-the-top services, education and bill payments.

“The work (to establish the super app) is in full throttle. Of the total investment required, Tata Sons may raise money from group firms or (issue) debt papers to infuse around $2 billion into the platform,” one of the two people cited above said on condition of anonymity, adding the decision was taken at Tata Sons’ 12 October board meeting.

According to the people cited above, the Tata group holding company eventually plans to sell a stake in the super app venture to external investors to raise money, akin to Jio Platforms’ mega fundraising last year.

“Post this round, an additional $5 billion will be raised externally from long-term investors such as global pension funds, sovereign funds and insurance companies,” the person cited above said. In a similar move, Tata Motors recently raised $1 billion for its electric vehicle unit from the TPG Rise Climate fund.

“For now, the capital to be invested by Tata Sons will be done through a mix of equity and mezzanine debt,” the second person said.

In FY21, Tata Sons posted a 142% jump in standalone profit to ₹6,512 crore, with a revenue of ₹19,598 crore. Net debt was ₹27,615 crore on a standalone basis, nearly the same as ₹.27,753.18 crore in the previous fiscal. Adjusted net debt of the entire group stood at ₹2.6 trillion compared with ₹2.38 trillion the previous fiscal.

Several large global investors have sought details from Tata Sons on the operational structure of Tata Digital (under which TataNeu will operate) and ways to integrate existing retail operations such as Trent Ltd and Titan Co. Ltd. Tata Sons has already invested over ₹15,000 crore in the business, including acquisitions.

“This is a capital-guzzling business, and it takes several years to break even,” the first person said.

Analysts expect fierce rivalry for Tata’s super app from Reliance Jio, Amazon, Paytm and Walmart-Flipkart. Tata Digital already has more than 400 million users across its digital verticals, according to the person cited above.

“The launch plan got delayed partly because of the government’s proposed consumer protection rules and e-commerce norms, on which Tata Digital, as well as every existing e-commerce player, has sought clarity, especially with regards to policies involving distribution partnerships and logistical tie-ups,” the second person said.

Most large e-commerce players depend on external funding for growth. Jio Platforms, owned by Asia’s richest man Mukesh Ambani-promoted Reliance Industries Ltd, last year raised $15.2 billion from a bunch of investors, including Google, Facebook, Microsoft and Abu Dhabi Investment Authority.

After raising the money, Jio’s retail reach has increased, which in turn augmented the digital business revenues for the group. Through Reliance Jio Infocomm’s connectivity, RIL has expanded its network and established hyperlocal commerce with small merchants across the country. This is somewhat similar to Tata’s super app ambitions.

To be sure, Tata has started integrating many of its services under one platform and has enhanced its ability to offer customers a full range of products and services. While working on the super app, Tata has acquired a 64.3% stake in online grocer BigBasket for ₹9,500 crore. It also acquired digital pharmacy 1mg and signed a deal to invest up to $75 million in CureFit Healthcare.

Tata Sons recently agreed to buy a 43.35% stake in telecom gear maker Tejas Networks Ltd for ₹1,884 crore. At present, Amazon and Flipkart lead the retail e-commerce space.