Amazon is making a big push into India’s offline retail market by purchasing a minority stake in Future Retail — a move that could eventually lead to a larger buyout
Dilsher DhillonNov 27, 2018, 03.24 PM
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Amazonis reportedly set to take a 9.5% stake in Future Retailin a ₹25 billion deal that includes the option for a larger buyout of Biyani’s 46.5% stake in the company in the long-term.
- The agreement, which will see Amazon acquire the minority stake through the foreign portfolio investor (FPI) route, is expected to close next month.
- Future Retail, which notched up sales of ₹184.8 billion in the previous financial year, manages about 80 consumer brands and has more than 1,100 physical outlets across the nation.
However, last month, buzz around the deal began again after the Press Trust of India reported that
As things currently stand, Amazon is reportedly set to take a 9.5% stake in Future Retail in a ₹25 billion deal that includes the option for the complete buyout of Biyani’s 46.5% stake in the company in the long-term, according to the Economic Times.
The agreement, which will see Amazon acquire the minority stake through the foreign portfolio investor (FPI) route, is expected to close next month. The FPI route will limit Amazon’s investment to a 10% holding. However, Indian laws currently allow for up to 51% holding by a foreign entity in the multi-brand retail space.
The move signals Amazon’s larger plans for India’s offline retail market. Future Retail, which notched up sales of ₹184.8 billion in the previous financial year, manages about 80 consumer brands, including
Earlier this year, Amazon took a position in Witzig Advisory Services, which is acquiring the Aditya Birla Retail’s More supermarket franchise in India. In November 2017, it also bought a 5% stake in Shoppers Stop, also through the FPI route.
More importantly, the Future Retail deal will give the American online retail giant a pan-India presence. That will be a significant leg up when it comes to directly competing in India with Walmart, which sealed the acquisition of a 77% stake in Indian
Amazon’s plans indicate its awareness of the ground realities in India. While online retail receives all the hype as one of India’s fastest growing industries, the importance of physical retail cannot be discounted.
A large majority of the Indian populace still buy their goods at physical outlets, and that doesn’t look to change anytime soon. Amazon can leverage Future Retail’s supply chain and warehousing network to distribute goods in smaller cities and hold inventory for its e-commerce operations, all of which will justify its decision to increase its stake in the company in the future.
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