American e-commerce giant Amazon is reportedly trying to increase its retail footprint in India with advanced stage discussions taking place with Future Retail Ltd for picking up an 8-10% stake in the Indian retail chain, a Press Trust of India (PTI) report said.
The deal is expected to close in the next few weeks, the agency added, quoting unnamed sources.
Founded by Kishore Biyani, Future Retail operates hypermarkets and supermarkets under brands that include Big Bazaar, Easyday, Foodhall, HyperCity, FBB, Heritage Fresh, Ezone and WH Smith. It runs over 2,000 stores in 400 cities and is India’s second-biggest retailer by turnover.
Amazon's American competitor, retail giant Walmart last year acquired India’s leading e-commerce firm Flipkart for US$16 billion and the report speculated that Amazon is trying to increase its brick-and-mortar retail footprint in the country with Future Retail reportedly seeking a price tag of about 20 billion rupees (US$281
million) from Amazon for the stake.
Strengthening Indian footprint
Founded in 1987, Future Retail is a subsidiary of the Future Group and is a stock exchange-listed company. As of June 2019, promoter Biyani and his group were holding 47.02% shares.
The PTI report noted that if the deal materialises, it would help Amazon further strengthen its foothold in the Indian market, where it already has a sizeable online marketplace.
Deal with Future Retail enhances Amazon’s market position
In 2017, Amazon bought a 5% stake in Indian apparel and household products retailer Shoppers Stop Ltd and in September 2018 it picked up a stake in grocery chain More. Future Retail would be Amazon’s third investment in the Indian brick-and-mortar retail market.
A deal with Future Retail will also help Amazon compete against Walmart-backed Flipkart as well as a proposed e-commerce venture by Reliance Industries, which is controlled by India's richest man Mukesh Ambani.
This oil-focused conglomerate - which reported annual revenue of US$87 billion for the financial year ending March 2019 - has diversified interests ranging from telecoms to real estate. Its planned entry into the e-commerce space is being closely watched, given the huge impact it would have on the industry, analysts and business leaders say.
Ambani Group copies Alibaba’s business model
In January Mr Ambani said that his companies Reliance Retail and Reliance Jio Infocomm were working on “creating the world's largest online-to-offline new commerce platform,” starting in the western Indian state of Gujarat.
The platform would reportedly benefit some 1.2 million small retailers and shopkeepers by enabling them to sell their products online. The business model is similar to that of Alibaba in which local offline merchants team up with an online marketplace.
Reliance Industries has so far declined to comment on its planned e-commerce venture. PTI quoted a source at Reliance as saying that the company was still working “on formulating plans” for the venture and that it did “not have a timeline for its launch”.
A recent study by Morgan Stanley estimates that India's e-commerce market is growing by 30% a year in terms of gross merchandise value and is expected to be worth US$200 billion by 2027, helped by an expanding middle class and a rapid rise in the number of internet users.
Nol van Fenema