The US giant Amazon.com Inc. is in talks to obtain 42-49% in Aditya Birla Retail Ltd’s More supermarket chain. The e-commerce giant has doubled down on the grocery business in India. Amazon is in terms to collaborate with Samara Capital, an India-focused private equity firm for a complete takeover of More from the Aditya Birla Group for ₹ 4,200-4,400 crore.
The news was revealed by three people that are completely aware of the talks on the condition of anonymity.
One of the three people told that Samara and Amazon will jointly place their funds in a shell entity and this entity will buy More from Aditya Birla Group. Depending on Amazon’s stake in More, Samara would hold the rest.
The Aditya Birla Group will sell the supermarket chain More to Witzig Advisory Services, owned by Samara Alternative Investment Fund. Eventually, Amazon will pick up a 49% stake. The Witzig-Samara end of the deal was made public in an exchange filing on Wednesday.
It took more than a month’s time for the legal teams of all the parties to finalize the complex deal structure, said the people cited above.
India permits foreign retailers to own as much as 51% stakes in multi-brand retail business enterprises, after acquiring government approval.
However, the foreign investors need to fulfil several other conditions.
Amazon is strategizing all the moves very carefully by following an indirect route and a lower stake than the minimum limit to avoid all possible problems.
Over the past months, Amazon has also been in talks with RP-Sanjiv Goenka Group-owned supermarket chain Spencer’s Retail Ltd to explore a prospective investment. It wasn’t successful though, the people mentioned above said.
Amazon is taking all necessary steps and evaluating its market well to invest in its food retail business in India. It will invest at least $500 million in the food retail business and will make sure it does not miss out in the bid to gain market share in groceries.
The talks to buy a majority stake in Aditya Birla’s More supermarket chain had started from the beginning of the year, the people mentioned before said.
According to a report in May by The Economic Times, it said that Samara Capital was in talks to buy out More. Later in June it further published that Aditya Birla Retail had signed an agreement to sell More for roughly ₹ 4,300 crores.
Several reports in the media from past six months have also pointed out that Amazon has also been in talks to buy a stake in Kishore Biyani’s Future Group. Although, there is no clarity on the status of these talks.
Both Amazon India’s corporate communications team and Samara Capital have not been responding to any of these reports. A spokesperson for Aditya Birla Group did say that the company does not comment on “market speculation”.
Amazon’s efforts to spread out its retail and grocery business in India come at a time when its competitor in the US market, Walmart Inc., is also seeking opportunities to dominate India’s fast-growing online retail business.
Walmart is expected to give a tough challenge to Amazon. It has recently closed its $16 billion takeovers of India’s largest e-commerce firm, Flipkart. Walmart also has a well-built market in the grocery business and is expected to give a significant challenge to Amazon in the years to come.
More is currently the fourth-largest supermarket chain in India, after Reliance Retail, Future Group and D-Mart. In Financial Year 2018, ABRL posted its first positive earnings before interest, taxes, depreciation and amortisation (EBITDA) at Rs 1 crore.
More’s stores will be decisive for Amazon’s strategy which is intended to widen and deepen its footprint in food and grocery retail with the help of its platform, Amazon Prime Now. Prime Now is currently limited to some areas of Mumbai, New Delhi, Hyderabad and Bengaluru.