United Spirits paid ₹27 crore for 26% of HipBar — sold it for ₹52 lakh three years later

In 2018 Diageo-owned United Spirits Limited (USL) paid ₹27 crore for a 26% stake in Hip Bar, a Chennai-based start-up that began as a payments and alcohol delivery platform with a mobile wallet and delivery app. USL said at the time that the investment would give it growth opportunities in online and e-commerce channels.

In July 2021 USL's board approved selling the stake to promoter Prasanna Natarajan for an estimated ₹52 lakh, roughly three years after investing. USL had already fully impaired the investment in the 2020-21 financial year, so the company said the sale would not hurt its current-year performance. Hip Bar's revenue for the year ended March 2020 was ₹50 lakh.

USL chief executive Hina Nagarajan told analysts that HipBar had been 'very differentiated' when USL entered, as the only operator with home delivery in Karnataka, but newer entrants had since arrived. She said the HipBar model might not be as differentiated as those of Swiggy and Zomato, and that investing in an exclusive alcohol-only delivery platform was not appropriate.

₹27 crore invested; stake sold for an estimated ₹52 lakh in July 2021 and fully impaired in FY2020-21.

USL bought into a start-up whose edge was being the only home-delivery operator in one state, Karnataka.

Newer entrants arrived and the model's differentiation eroded, according to USL's own chief executive.

USL concluded that general delivery platforms such as Swiggy and Zomato made an alcohol-only platform a poor fit for further investment.

The start-up's revenue was only ₹50 lakh in the year to March 2020, against the ₹27 crore USL paid.

A niche head start does not hold in a market the giants enter. A single-category delivery app needs a model that stays differentiated once general delivery platforms scale.

After the sale Hip Bar ceased to be an associate company of USL. USL said it would keep working with retailers, regulators and delivery platforms on home delivery, which several Indian states, including Delhi, were moving to allow or scale up as the pandemic shut liquor stores.