Kishore Biyani-led Future Group is reportedly planning to cut its debt by selling a significant chunk of its Future Retail Business to ecommerce giant Amazon.
According to an Economic Times report, Future Group is also considering to demerge the food business of Future Retail into an independent entity. If successful, Future Retail would be able to attract more investment from Amazon as the Indian foreign direct investment (FDI) allows 100% overseas capital in retail entities that only deal in locally sourced and packaged food.
Both Future Retail and Amazon did not comment on the report.
Future Retail has more than 1,500 stores across 437 Indian cities and towns. Meanwhile, food accounts for a major chunk of sales in Future Retail’s flagship Big Bazaar. On the other hand, the US-based ecommerce giant also owns Amazon Retail India, in which it is planning to invest close to $500 Mn.
According to sources, the Amazon-Future Retail deal is expected to be similar to the one between Amazon and Aditya Birla’s More retail stores. In September 2018, Amazon and Samara Capital had agreed to acquire ‘More’ from the Aditya Birla Group for a reported deal value between $644.09 Mn (INR 4,500 Cr) – $715.66 Mn (INR 5,000 Cr). The acquisition took place through Witzig Advisory Services, a subsidiary of Samara.
According to a Ministry of Corporate Affairs filing of Witzig Advisory Services, Amazon has picked up 49% stake in the company, but has only bought 17% voting rights via Class A equity shares and the rest 32% stake through Class B equity shares which don’t have voting rights.
This would not be the first deal between Amazon and Future Retail. Last year, Amazon also acquired 49% stake in Future Coupons, the promoter entity of India’s second-largest retail chain Future Retail. Future Coupons owned 7.3% shares in the publicly-listed Future Retail and through this transaction, Amazon has also managed to acquire around a 3.58% stake in the company.
“Amazon has agreed to invest in Future Coupons Limited, which is engaged in developing innovative value-added payment products and solutions such as corporate gift cards, loyalty cards and reward cards primarily for corporate and institutional customers,” Future Retail said.
After the deal was approved by the Competition Commission of India (CCI), Future Retail and Amazon India entered into long-term business agreements for expanding the reach of Future Retail stores and consumer brands through the Amazon India marketplace.