Amazon, the world’s leading e-commerce platform, is reportedly all set to acquire a minority stake in Future Retail. The deal, which is expected to take place next week, will provide Amazon with access to about one-third of India’s organized food and grocery market.
This deal also represents Amazon’s stand to take on its US-based rival Walmart, which recently acquired Amazon’s rival online platform Flipkart for about $16 billion in May this year. Currently, Amazon offers food products through Amazon Pantry and standalone app Amazon Now.
According to the reports, the deal is worth around ₹2,500 crores and will be made through the foreign portfolio investor (FPI) route. This will give Amazon around 9.5 percent stake in Future Retail which has more than 1,100 physical stores across India, including Big Bazar, and Nilgiris Supermarket chains.
People aware of the development suggests that the companies have already signed a term sheet and could announce the deal officially after the board approval on 14th November. However, Amazon and Future Retail have declined to officially comment on this.
According to the experts, the company’s involvement will not just be limited to financial investment but could also leverage the network of Future Group for supply chain and other related operations.
The development related to the acquisition of minority stake in Future Retail first began in January this year when Kishore Biyani, founder of Future Group, met Amazon founder Jeff Bezos at the company’s headquarters in Seattle.
While India allows 51 percent overseas investment in multi-brand retail, Amazon can’t pick up more than 10 percent stake in an Indian entity as a single brand through the arm that’s registered as an FPI. The US-based company used the same route to acquire 5 percent stake in Shoppers Stop last year.
A couple of months ago, Amazon also acquired a stake in More Supermarkets, a retail outlet chain from Aditya Birla Retail through its Witzig Advisory Services, along with its co-investor Saama Capital.
It seems that the e-commerce giant is now actively trying to take a position in India’s offline retail market, which currently accounts for more than 95 percent of overall sales. Amazon’s move into the offline space is not just limited in the Indian market. In the US, the company recently acquired grocery chain Whole Foods for around $14 billion. It is also doubling down on its Amazon Go store, which provides a checkout-free shopping experience.
As per the report from Morgan Stanley, India’s food and grocery market is expected to become the fastest growing retail segment in the country, expanding at a compound annual growth rate of 141 percent by 2020 and contributing $15 billion compared to the overall market.
