Amazon Investment Could Lead to Large Stake in India Retail Chain
September 20 2018 - 8:51AM
Dow Jones News
By Corinne Abrams
MUMBAI -- Amazon.com Inc. has upped the ante in its battle with
Walmart in India, by joining forces with a local private-equity
firm that is acquiring one of the largest retail chains in the
South Asian nation for more than $500 million, a person familiar
with the matter said.
The deal could give Amazon a stake to the more than 500 stores
of Aditya Birla Retail, which runs the More chain supermarkets and
hypermarkets and comes just months after Walmart paid $16 billion
for a 77% stake in one of India's top e-commerce sites,
Flipkart.
Amazon has invested in an arm of Samara Alternative Investment
Fund, an Indian investor, which taking over the More chain, said
the person familiar with the deal. The deal had an enterprise value
of around 42 billion rupees ($583 million), another person familiar
with the matter said.
The person didn't know what stake Amazon will end up holding in
the chain but local regulations would restrict Amazon from owning
51% or more of a local retailer.
An announcement at the Mumbai stock exchange Wednesday said the
Samara subsidiary, Witzig Advisory Services, had bought a 99.99%
stake in Aditya Birla Retail from the entities that controlled the
shares.
The deal could give Amazon an important foothold in one of the
world's last great untapped retail markets. Access to More's
customers, data and outlets could help it better understand and
deliver to India's population of around 1.3 billion people.
The Indian e-commerce market is set to exceed $100 billion by
2022, a report from PwC India and the National Association of
Software & Services Companies said. In the groceries market,
e-commerce companies face tough competition from other big Indian
supermarket chains as well as millions of mom-and-pop stores that
most Indians use for their everyday needs.
Aditya Birla Retail's revenue was 41.94 billion rupees for the
year ended March 31, 2017, compared with 35.09 billion rupees a
year earlier, the latest balance sheets filed with the country's
Ministry of Corporate Affairs showed. The company lost 990 million
rupees in that period, compared with a loss of 1.68 billion rupees
a year earlier.
Samara executives didn't respond to requests for comment. An
Aditya Birla Group spokeswoman declined to comment beyond what was
in the release at the exchange.
Amazon founder Jeff Bezos has pledged to invest $5 billion in
India, and the company looks set to go head-to head with Walmart
both on and offline.
The investment in the firm that bought Aditya Birla Retail
complements Amazon's last bet in the space -- a 5% stake in Indian
department-store chain Shoppers Stop Ltd. The new investment could
provide the company with much-needed physical space and access to
an established supply chain.
"Amazon is going to be open on all the retail opportunities in
India," said Abneesh Roy, an analyst at Mumbai-based Edelweiss
Securities. "This is part of the omnichannel strategy of
Amazon."
Despite the country's large population and growing middle class,
India has long been known as a tough place to make money for global
retailers. Government restrictions, overburdened infrastructure and
surprisingly expensive retail rents make it difficult for even the
retail giants here.
The companies investing in India -- IKEA just opened its first
outlet in India last month, for example -- see it as a long-term
bet on the eventual emergence of a new consumer class and room to
grow in mobile adoption and online retail.
--Debiprasad Nayak and Rajesh Roy contributed to this
article.
Write to Corinne Abrams at corinne.abrams@wsj.com
(END) Dow Jones Newswires
September 20, 2018 08:36 ET (12:36 GMT)
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