The new division was incomplete when the British began Operation Compass in December but the Babini Group fought in defence of the area between Mechili and Derna in late January.

On 23 January, the group managed to inflict tank losses during a counter-attack on the 11th Hussars and force a delay in the Australian advance on Derna.

The group then formed a rearguard for the 10th Army as it retreated from Derna and Mechili round the Jebel Akhdar towards the port of Benghazi.

The Babini Group was destroyed south of the port at the Battle of Beda Fomm (6–7 February), when the Litoranea Balbo (Via Balbia) was cut by Combeforce.

In November, the III Tank Battalion M13/40 was sent to Mechili and on 9 December, Operation Compass began to push back the 10th Army from Sidi Barrani, 62 mi (100 km) inside Egypt.

[5] After the invasion of Egypt in September 1940, the 10th Army began to prepare an advance to Mersa Matruh for 16 December but was forestalled by Operation Compass.

By 10:40 a.m., the camp had been overrun and 2,000 Italian and Libyan prisoners captured, along with a large quantity of supplies and water, for a British loss of 56 men.

The Tank Battalion Ls remained with the infantry divisions in Egypt, despite this interrupting training with the new M13/40s, which was complicated by the M13s coming from the first production batch with many mechanical defects.

[2] The area east of the Jebel Akhdar mountains around Derna, was garrisoned by XX Corps (Lieutenant-General Annibale Bergonzoli) with the 60th Infantry Division "Sabratha" and the Babini Group, which had already lost some of its tanks in Tobruk.

Next day, 10–15 M13/40s of the Babini Group attacked the 7th Hussars of the 4th Armoured Brigade, which was heading west to cut the Derna–Mechili track north of Mechili.

[13] Tellera intended to use the Babini Group to harass the British southern flank to cover a withdrawal from Mechili but Graziani ordered him to wait on events.

[14] In the north, on 25 January, the 2/11th Australian Battalion engaged the 60th Infantry Division "Sabratha" and the 10th Bersaglieri Regiment of the Babini Group at Derna airfield, making slow progress against determined resistance.

Italian bombers and fighters flew sorties against the 2/11th Australian Battalion, as it attacked the airfield and high ground at Siret el Chreiba.

The 10th Bersaglieriswept the flat ground with field artillery and machine-guns, stopping the Australian advance 3,000 yd (1.7 mi; 2.7 km) short of the objective.

[15] On 26 January, Graziani ordered Tellera to continue the defence of Derna and to use the Babini Group to stop an advance westwards from Mechili–Derna.

During the day, the 2/4th Australian Battalion, in the Derna–Giovanni Berta area, attacked and cut the Derna–Mechili road, a company crossing Wadi Derna during the night.

The Italians disengaged on the night of 28/29 January before the garrison could be trapped and Babini Group rearguards cratered roads, planted mines and booby-traps and managed to conduct several skilful ambushes, which slowed the British pursuit.

Lorries carrying petrol caught fire and lit the dusk, illuminating targets for the British gunners and giving the tanks en route a mark to drive on.

[22] Tellera, commanding the rearguard, had to retain part of the Babini Group, rather than send all of it south to reinforce Bergonzoli for the attempts to break through the British blocking position and continue the retreat to Agedabia.

The breakthrough attempts to the south could not be fully reinforced and the Italians could not expect to be undisturbed by British attacks along the convoy or the Australian advance down the Via Balbia, towards the tail of the column.

[23] The retirement of the 4th Armoured Brigade into laager, led Bergonzoli to believe that the force would concentrate in defence of the roadblock and during the night, he organised an attack down the Via Balbia, to pin down the defenders.

[24][26] On the Via Balbia, the first wave of ten M13s from the Babini Group, advanced slowly at 8:30 a.m. and were surprised when turrets of the British cruisers appeared over a ridge 600 yd (549 m) away.

[2] Bergonzoli abandoned attempts to hook round the eastern flank and sent the last of the Babini Group west through the dunes, just as the British tanks had to rearm.

[31] The Babini Group had only about thirty tanks left and Bergonzoli planned to us them to force a passage through Combeforce at dawn, before the British could attack the flanks and rear of the column.

[36] In 2003, Ian Walker described the loss of the Ragruppamento Maletti in the Attack on Nibeiwa, the first encounter of Operation Compass, as a disaster which cost the Italians the initiative.

The Action at Mechili by the Babini Group on 24 January 1941, showed that Italian armoured forces had more potential than at first appeared, gaining an advantage in their first encounter with British tanks and then withdrawing before they were cut off and enabling the 60th Infantry Division "Sabratha" at Derna to retreat.