Fri, 24 May 2019

Amazon makes big push into India's offline retail space

By Sheetal Sukhija, Vermont State News
22 Sep 2018, 21:04 GMT+10

SEATTLE, U.S. - Starting off in 1994 as a modest firm to sell books in Seattle, Amazon's trajectory in its 21 years of existence has been marked with bold risks.

Amazon's wild growth, which has largely been organic, has made it not only the world's largest online retailer, but also the second ever U.S.-listed firm to have a market value of more than $1 trillion.

Yet, despite dominating nearly half of all eCommerce sales in the U.S., Amazon continues to lose money internationally.

However, the world's richest man clarified in a daring move this week, that he was willing to spend at a loss to establish a franchise out of home and continue challenging arch rivals.

The Jeff Bezos-led global eCommerce giant, which has been locked in an intense battle for dominance, against its U.S. rival Walmart in India, announced its latest expansion in the Asian subcontinent.

Announcing the move that marked its entry into India's offline retail space, Amazon said that it had signed a joint investment deal with the Indian private equity firm Samara Capital.

As part of the deal, Amazon and Samara will jointly invest in Witzig Advisory Services, which would hand the Seattle-based eCommerce giant, a majority stake in an Indian supermarket chain.

In a statement, Amazon said that it had decided to co-invest in Witzig Advisory Services along with Samara and pointed out that the deal would give it ownership of stake in India's More's supermarkets and hypermarkets.

According to the statement, Witzig Advisory Services, which is owned by Samara Alternative Investment Fund, is currently in the process of acquiring Aditya Birla Retail.

A stock exchange filing by Witzig showed that the Aditya Birla Retail currently operates over 540 More stores across India.

An Amazon spokeswoman said in a statement, "Through this investment, Amazon looks to enhance its services portfolio and meaningfully invest in and create opportunities for skill development and job creation."

According to industry sources, Samara is believed to have acquired a majority 51 percent stake in Aditya Birla Retail Ltd (ABRL), while Amazon could have picked up the remaining 49 percent, in accordance with Indian restrictions on foreign ownership of multi-brand retail stores.

Amazon has not revealed the size of its investment or its stake in the supermarket chain in its official statement.

A regulatory filing by RKN Retail said, "The board of directors of the company, at its meeting held on September 19, 2018, has approved the sale of its entire shareholding in ABRL, constituting 62.19 percent of the paid up capital of ABRL, to Witzig Advisory Services Private Limited (Witzig) which is owned and controlled by the Samara Alternative Investment Fund."

The filing further added, "The company has, today, jointly with Kanishtha Finance and Investment Pvt Ltd and ABRL, entered into a share purchase agreement with Witzig, to sell their combined stake aggregating to 99.99 percent in ABRL."

The food and grocery retail chain - More, which largely operates its 523 supermarkets and 20 hypermarkets in smaller cities and towns in India, is believed to be valued at roughly $580 million.

In its biggest acquisition till date, Amazon bought the premium grocery store chain, Whole Foods market, for $13.6 billion in June last year.

The acquisition gave Amazon access to 474 stores in the U.S., Canada and the U.K.

Experts claim that Amazons offline play in India is in line with its commitment to invest $500 million to expand in the country's food retail and groceries space in India.

Further, Amazon's deal, which was the most significant M&A deals announced in India since the Walmart-Flipkart deal in May, is set to help the company compete with its U.S. rival on a whole new level.

According to experts, Amazon's deal, which is still subject to regulatory approvals, will also hand the U.S. eCommerce giant, a significant inroad into India's $60 billion-worth organized retail market.

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