A day after the world’s biggest brick-and-mortar retailer Walmart completed its acquisition of e-tailer Flipkart, the buzz is that Amazon is also busy fanning its offline ambitions. The world’s largest online retailer is reportedly interested in Kumar Mangalam Birla’s food and grocery supermarket chain More.
Citing people in the know, The Economic Times reported that Amazon is teaming up with Goldman Sachs and Samara Capital – a homegrown mid-market India focussed private equity fund – to form a consortium to buy More at an enterprise valuation of Rs 4,500-5,000 crore.
Amazon, Goldman Sachs may acquire Indian supermarket chain More
Back in end-June, Aditya Birla Retail Ltd (ABRL), the unlisted retail arm of Aditya Birla Group, had signed an “exclusivity” agreement with Samara for the sale and the latter, in turn, reached out to Goldman Sachs and Amazon to join forces.
The daily added that Goldman Sachs Special Situations Group will be the likely vehicle within the investment bank for this transaction and the consortium is planning to float a separate company or special purpose vehicle in which Amazon will pick up a 49 per cent stake as the “strategic partner”. A formal announcement is expected either by month-end or in early September.
If the deal goes through, More will be Amazon’s second direct investment in India’s offline retail space, following its 5 per cent stake in Shoppers Stop, India’s largest listed department store chain, for Rs 180 crore last September. The Jeff Bezos company also shook the US grocery sector earlier this year with its unexpected $13.7 billion purchase of Whole Foods, one of the country’s most successful retailers.
Of course, the same can’t be said about the loss-making More. It has tried to raise private equity capital at least twice before but failed. However, as India’s fourth-largest supermarket chain with 493 supermarkets and 20 hypermarkets across the country – especially concentrated in the southern states of Karnataka, Andhra Pradesh and Telangana – More is well poised to strengthen Amazon’s food and grocery business presence. ABRL competes with the likes of Reliance Retail, Future Group and Avenue Supermart, which runs the D-Mart retail chain.
The move also makes sense since the Seattle-based e-commerce giant’s ambitions of being the first foreign e-tailer to sell food items directly to customers have been a non-starter due to policy ambiguities. To remind you, last year, Amazon was granted permission by the Indian government to invest $500 million in a wholly-owned venture to sell local produces and packaged food items through online and offline mediums. Though Bezos has reportedly already invested about Rs 100 crore ($14 million) in that business – under Amazon Retail India Pvt – things are yet to gain traction.
If Amazon is successful in picking up a stake in More, the development will only intensify the competition in the omni-channel space. Apart from Walmart and Amazon, Chinese behemoth Alibaba, which has invested heavily in India in the retail and payments space through Paytm and BigBasket, is also seeking local retail partners among storied domestic conglomerates such as Tata and Reliance.
The latter, in fact, has separately announced plans to create a “hybrid, online-to-offline new commerce platform”. At Reliance Industries’ 41st AGM meeting last month, Mukesh Ambani had said “We shall create this by integrating and synergising the power of Reliance Retail’s physical marketplace with the fabulous strengths of Jio’s digital infrastructure and services”.
Clearly, the battlelines are no longer drawn up between online and offline players as both try to combat shrinking retail margins.