Here Is How Amazon-Samara Capital Are Betting On Aditya Birla’s More

While global retailer Walmart acquired Flipkart after months of deliberation and market speculations, the recent reports of global ecommerce giant Amazon and private equity fund Samara Capital’s acquisition of Aditya Birla’s retail chain More had surfaced in last one month and have been successfully closed as well.

However, here’s a twist. Samara Capital and Amazon are not acquiring More.

The companies have “agreed to co-invest in a facilities support and management and value-added services company called Witzig Advisory Services Private Limited.”

Paurush Roy, Director, Witzig Advisory Services Pvt. Ltd told Inc42 that the view behind investments is to create opportunities for, skill development, and employment generation.

WASPL claims to focus on skill development, vocational training and will contribute towards employment generation with respect to facilities support and management and other value added services such as installation, housekeeping, engineering support, electrical technicians, service staff, plumbing technicians, etc. for business customers.

Following this investment, Witzig has agreed to acquire the grocery and retail stores chain More. It is to be noted that Paurush Roy is also a Director at Samara Capital.

Roy shared that with a strong portfolio of investments in facilities support and management, Samara Capital will continue to focus on enhancing its presence in this sector.

At the same time, Amazon looks to enhance its services portfolio and meaningfully invest in and create opportunities for skill augmentation and job creation.

“Both Samara, and Amazon see a significant growth potential in the area of services more broadly and facilities support, and management services more specifically,” he added.

More is the fourth-largest supermarket chain operator in India. There are 568 stores under the More brand across the country, covering more than 2 Mn sq ft of retail space.

However, More lags behind the Future Group, Reliance Retail, and DMart in terms of the number of outlets.

In FY17, ABRL reported a 20% increase in sales to $600.52 Mn (INR 4,194 Cr), reducing its net loss to $92.21 Mn (INR 644 Cr). However, the company had a debt of about $941.14 Mn (INR 6,573 Cr) on its books and financing costs amounted to $67.43Mn (INR 471 Cr) for the year.

After significantly scaling down its operations, More achieved a store-level EBITDA (earnings before interest, taxes, depreciation, and amortisation) breakeven.

Further, Roy believes that the company is led by veterans in the retail space and further supported by an experienced and capable management team.

“We are confident that through More, we will be able to address customer needs for choicest of grocery and food items across the country and also provide India’s farming community additional sources of income,” Roy added.

Reports on Amazon forming a consortium to acquire food and grocery supermarket chain More first surfaced a month ago. It was then suggested that Amazon, along with Goldman Sachs and Samara Capital, would form a consortium to acquire More. It was also reported that the deal would value More at $644.09- $715.66 Mn (INR 4,500-5,000 Cr).

The idea was to float a separate company or a special purpose vehicle in which Amazon would pick up a 49% stake as a strategic partner. It was also speculated that the final structuring exercise was already on, ahead of a formal announcement.

Notably, the acquisition will effectively wipe out the entire debt in Aditya Birla Retail Ltd (ABRL)’s book, which stood at about $565.3 Mn (INR 4000 Cr) as of March 2018. The deal was expected to be carried out through an existing facility management backend firm.

The reports also said that with Samara acquiring a 51% stake in More and Amazon wanting the remaining 49%  —which is just short of the permitted 51% in multi-brand retail FDI — there was no space for Goldman Sachs in the deal.

More complements Amazon’s plans to venture into food retail in India — a plan that has hit a major roadblock due to policy ambiguities, even though Amazon had received in-principle approval to invest $500 Mn in a subsidiary that was allowed to sell locally produced and packaged foodstuff, both online and offline.

The Confederation of All India Traders (CAIT) already plans to file a complaint with the Competition Commission of India (CCI) against such a deal. With an indirect investment for More, Amazon and Samara Capital have secured them against any legal troubles.