Amazon signs deal to buy stake in Future Retail

Team Udayavani, Aug 23, 2019, 6:34 PM IST

New Delhi: American e-commerce giant Amazon has signed a deal that would give it the option to take a significant stake in Future Retail Ltd, gaining access to physical stores across the world’s fastest-growing retail market.

The deal would indirectly give Amazon a 3.58 per cent stake in Future Retail Ltd, which runs more than 2,000 stores, including budget department and grocery chain Big Bazaar, in 400 cities in the Asia’s third-largest economy, the Indian firm said in a regulatory filing.

Future Retail said Amazon has agreed to buy a 49 per cent stake in Future Coupons Ltd.

Future Coupons owns a 7.3 per cent interest in Future Retail Ltd (FRL).

The agreement – subject to regulatory approval – gives Amazon the option to buy all or part of Future Coupons’ shareholding in Future Retail. This, however, will not be exercisable until between three and ten years.

Future Retail did not disclose the terms of the deal.

It also gives Amazon the right of first refusal should Future Retail’s founder, Kishore Biyani or his family decide to further trim the 47.02 per cent stake they hold in the company. This stake includes both direct and holding through entities such as Future Coupons.

The deal comes amid reports of Amazon being in late-stage talks to snap up to 10 per cent in India’s third-largest merchandiser, whose founding family was seeking a valuation of about Rs 2,000 crore.

The agreement would help Amazon, which has already committed an investment of USD 5 billion into the Indian market along with a USD 500 million bet on the grocery segment, tap traditional walk-in consumer in the world’s fastest-growing retail market, which is expected to be worth USD 1.2 trillion by 2021.

Amazon is looking to raise presence in the country as it battles rival Walmart and richest Indian Mukesh Ambani, who is planning a hybrid e-commerce venture by coming online and offline retail formats.

According to sources, Amazon and Future Group had been in discussions since last year. However, the discussions were put on hold after the Indian government tightened FDI rules for e-commerce marketplaces earlier this year. The discussions were re-started some weeks back.

The new regulations bar online marketplaces with foreign investments from selling products of the companies in which they hold stakes, and ban exclusive marketing arrangements. Also, the inventory of a vendor will be seen as controlled by the marketplace if over 25 per cent of the vendor’s purchases are from the marketplace entity, including the latter’s wholesale unit.