Amazon Said To Be Ready To Acquire 10% Stake In Future Retail

Ecommerce giant Amazon is reportedly all set to pick up a minority stake of 10% in the Kishore Biyani-owned Future Retail that owns the popular Indian hypermarket chain Big Bazaar, supermarket Easy Day and premium lifestyle food superstore Foodhall. 

The deal is likely to be approved by Future Retail’s board on October 29, ET cited people familiar with the development as saying.

Earlier, it was reported that Amazon may have lost its bet on Future Retail after IT czar Azim Premji-led PremjiInvest acquired a 6% stake in the company for $251 Mn (INR 1700 Cr) in a block deal.

However, media reports suggested that Amazon was looking to gain ownership holding and business exclusivity with the investment in Future Retail. Amazon is expected to pick up shares in Future Retail via foreign portfolio investors at a hefty premium on the prevailing share price.

Future Retail’s shares reportedly went up by 14% after TV channels reported that Amazon is planning to acquire a 7-8% stake in the company. If the deal fructifies, Future Retail will have a value of $3.39 Bn (INR 25,000 Cr) in the market.

Amazon declined to comment on the reported deal. An email sent by Inc42 to Future Retail hadn’t elicited any response till the time of publishing this article. We will update the story as and when we get a reply.

Speculation regarding Amazon’s plan to pick up stake in the company has been doing the rounds since June this year. Amazon is also looking to create its presence in the omnichannel space in India.

According to Future retail’s annual report 2016-17, it has a customer base of 300 Mn expanding across 26 states, 240 cities and 901 stores. The company claimed to have clocked a total income of $2.5 Bn (INR 17,075 Cr), a profit after tax of $54 Mn (INR 368 Cr), and earnings per share of $1.1 Mn (INR 7.81) in 2016-17.

The Amazon-Future Retail deal comes soon after the ecommerce behemoth reportedly offered $400 Mn to Kolkata-headquartered Spencer’s Retail for 30% stake in the company. 

Meanwhile, Flipkart has entered the online grocery market with the launch of Flipkart Supermart, which is currently operational in all major pin codes of Bengaluru. It plans to expand to five to six major cities by the end of 2018.

Apart from Amazon and Flipkart, Paytm Mall is also emerging as a dominant player in this space. Earlier, in June, Paytm Mall received $225 Mn from international investment firms SoftBank and Alibaba.

An IBEF report suggested that online retail sales in India are expected to grow by 31% to touch $32.70 Bn in 2018. It says that the sector will be led by Flipkart, Amazon India, and Paytm Mall.

As the big three battle it out, we can expect to see an increasing number of investments and acquisitions in the online retail space.

[The development was reported by ET.]