Amazon Close To Picking Up 10% Stake In Future Retail

Back To The Shelf: Amazon May Finally Pick Up 10% Stake In Future Retail

SUMMARY

Future Group is seeking a valuation of about $281 Mn

Both companies have been in talks since last year

Amazon has already picked up stakes in Shoppers Stop and Aditya Birla Retail’s ‘More’

After the ecommerce foreign direct investment rules caused a lull in the plans of Amazon’s deal with Future Retail, the deal is now reportedly back on track.

A Bloomberg report cited people aware of the development to say that Future Group is seeking a valuation of about $281 Mn from Amazon for the stake

Both companies have been in talks since last year to align their businesses together through a stake deal. Amazon and Future Group have met several times to explore joint business plans about distribution, warehousing and creating special products for Amazon’s marketplace and its grocery offerings Pantry and Amazon Now.

The talks of Amazon buying a stake in Future first emerged in January when Future Group founder and CEO Kishore Biyani met Amazon founder Jeff Bezos at the latter’s Seattle headquarters.

In May 2018, it was reported that Amazon had begun talks with Future Retail to acquire 9.5% stake. In November 2018, another report showed that Amazon was discussing a wider agreement with the Indian retail conglomerate.

However, the discussions slowed down after the government implement the FDI changes in ecommerce on February 1. Amazon had reportedly suspended its plans to acquire a stake in Future Group at the time. Future Retail owns and operates brands such as BigBazaar, EasyDay, and Niligiris. The company has acquired half a dozen supermarket store chains and put together a total retail space of 13.6 Mn sq ft, with a presence in 255 cities through over 1,030 stores.

Amazon has already picked up stakes in Shoppers Stop and Aditya Birla Retail ‘More’ through the FPI route.

The interest of Amazon in dominating retail sector in the country with Future Group comes after US-based retail giant Walmart picked up a majority stake in Flipkart last year. Recently, a Euromonitor report titled Top 100 Retailers in Asia has ranked Walmart as the number one player in India’s retail companies, due to its acquisition of Flipkart. The company’s GMV for 2018 has been measured at $14.49 Bn.

The Indian retail market is estimated to be $600 Bn and one of the top-five retail markets in the world by economic value. India is one of the fastest-growing retail markets in the world. It is expected to grow to $1,200 Bn by 2021.

At present, the country is also working on a new retail policy to support the development of the sector that would benefit 65 Mn small traders. According to the action plan, a large-scale programme for capacity building of managers of small businesses would be undertaken to improve productivity. After a bust with ecommerce FDI rules, can retail policy also hamper Amazon-Future Retail plans?