India Is New Front on Retail War -- WSJ
September 21 2018 - 3:02AM
Dow Jones News
By Corinne Abrams
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 21, 2018).
MUMBAI -- Amazon.com Inc. has upped the ante in its battle with
Walmart Inc. in India, by teaming up 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 claim to the more than 500 stores
of Aditya Birla Retail, which runs the More chain of supermarkets
and hypermarkets. It comes just months after Walmart paid $16
billion for a 77% stake in Flipkart, one of India's top e-commerce
sites.
Amazon said it had joined with India-based Samara Capital to
invest in Witzig Advisory Services Pvt., a company that focuses on
training and providing facilities staff.
Witzig, which is controlled by Samara, has bought a 99.99% stake
in Aditya Birla Retail, according to an announcement at the Mumbai
stock exchange Wednesday. The deal had an enterprise value of about
42 billion rupees ($583 million), a person familiar with the matter
said.
"Both Samara and Amazon see significant growth potential in the
area of facilities support and management and valued-added services
in the coming years," an Amazon spokeswoman said in a
statement.
The Amazon spokeswoman declined to comment on the financial
terms of the deal or how the company would work with More
supermarkets.
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, according to a report from PwC India and the National
Association of Software & Services Companies. 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, up from 35.09 billion rupees a year
earlier, the latest balance sheets filed with the country's
Ministry of Corporate Affairs show. 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 online and off.
The investment in the firm that bought Aditya Birla Retail could
provide Amazon with much-needed physical space and access to an
established supply chain. It also complements the 5% stake the
Seattle-based company took in Indian department-store chain
Shoppers Stop Ltd.
"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 21, 2018 02:47 ET (06:47 GMT)
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