Amazon Deal Opens Door to Bigger Footprint in India
August 23 2019 - 3:37AM
Dow Jones News
By Corinne Abrams and Eric Bellman
MUMBAI-- Amazon.com Inc. has signed an agreement that would give
it the option to take a significant stake in one of India's largest
retailers.
The deal would indirectly give Amazon a stake of around 3.5% in
Future Retail Ltd., which runs more than 2,000 stores in 400 cities
in Asia's third-largest economy. The agreement--subject to
regulatory approval--also includes an option to buy part or all of
the 47% stake owned by the retailer's founding family, which
includes Chief Executive Kishore Biyani. The deal restricts the
time period that the call option can be exercised to a seven-year
window, according to a stock-exchange filing.
The initial share purchase and option will cost Amazon close to
$200 million, said a person familiar with the deal. The deal could
eventually give it access to physical stores across the
country.
The bigger stake sale would be dependent on a change in Indian
regulations, which restrict many types of foreign direct investment
in retail. Complicating matters further, India's states and union
territories currently can choose how to apply FDI policy, making
the application process cumbersome for foreign companies. Amazon
looks to be positioning itself in hopes of a rules change, analysts
said.
Amazon's stake in Future Retail comes from its investment arm's
acquisition of a 49% stake in Future Coupons Ltd., according to the
stock-exchange filing. Future Coupons owns 7.3% of Future Retail.
Future Coupons is the digital-payments arm of Future Group.
The investment "provides an opportunity for us to learn global
trends in digital payments solutions and launch new products," a
Future Group spokesperson said.
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 trade group.
Amazon has been seeking to expand in India and has pledged to
invest more than $5 billion in the country. It faces tough
competition from Walmart Inc.-backed e-commerce site Flipkart and
local players such as Reliance Industries, as well as from millions
of tiny mom-and-pop stores.
Write to Corinne Abrams at corinne.abrams@wsj.com and Eric
Bellman at eric.bellman@wsj.com
(END) Dow Jones Newswires
August 23, 2019 03:22 ET (07:22 GMT)
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