Amazon Investment Could Lead to Large Stake in India Retail Chain--Update
September 20 2018 - 11:40AM
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.
The deal could give Amazon a stake to the more than 500 stores
of Aditya Birla Retail, which runs the More chain of 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 said in a statement that it had invested with Samara
Capital, an Indian investor, in Witzig Advisory Services Pvt. Ltd.,
a "facilities support and management and value-added services
company" that focuses on skill development and employment
generation.
An announcement at the Mumbai stock exchange Wednesday said
Witzig, had bought a 99.99% stake in Aditya Birla Retail from the
entities that controlled the shares.
"Both Samara and Amazon see significant growth potential in the
area of facilities support and management and valued-added services
in the coming years," the Amazon spokeswoman said in a
statement.
The deal had an enterprise value of around 42 billion rupees
($583 million), a person familiar with the matter said.
The Amazon spokeswoman declined to comment on how the company
would work with More supermarkets and didn't respond to a question
about the value of the investment.
Local regulations would restrict Amazon from owning 51% or more
of a local retailer.
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 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 declined or didn't respond to requests for
comment.
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 11:25 ET (15:25 GMT)
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