- Amazon will be holding 3.6 percent in Future Retail through Future Coupons.
- The US-based retailing giant will buy 49 percent stake in Future Coupons, one of the promoter group companies of Future Retail, the firm said in a stock market filing on Thursday. Amazon can exercise its option to buy the promoters shareholding in Future Retail between the third and 10th years.
Amazon has decided to acquire an indirect minority stake in Future Retail which operates the Big Bazaar and EasyDay chains and can buy all or part of the promoters holding in the company after 3 years.
The US-based retailing giant will buy 49 percent stake in Future Coupons, one of the promoter group companies of Future Retail, the firm said in a stock market filing on Thursday. Amazon can exercise its option to buy the promoters shareholding in Future Retail between the third and 10th years.
The promoter group owns 47.02 percent in Future Retail. Although, the company didn’t disclose the valuation or the exact stake that Amazon will have in the Future Retail.
Owned by Future Group promoter Biyani, Future Coupons holds 39.6 million warrants in Future Retail, when exercised will convert into 7.3 percent stake in the company.
“The promoters have also agreed to certain share transfer restrictions on their shares in the company for the same tenure, including restrictions to not transfer shares to specified persons, a right of the first offer in favor of Amazon, all of which are subject to mutually agreed exceptions such as liquidity allowances and affiliate transfers,” Future Retail said in the statement.
Earlier, Amazon was in talks to buy up a stake in Future Retail which operates more than 1,600 stores across food, grocery, and general merchandise.
Both the companies took the route of stake sale through Future Coupons so that Amazon could adhere to the rules after the amendment of foreign ownership in February.
Future Group has control over a third of India’s organized food and grocery market through its chain of Big Bazaar and Nilgiri Supermarket chains. Physical stores account for more than 90 percent of all retail sales in India.
The early online retail models focussed on smartphones and apparel as quick wins now the attention is moving to grocery which has the highest frequency across categories and huge potential for private labels.
Every year, Indians spend $500 billion groceries but the online segment has only a 1 percent share in this according to brokerage house CLSA. The e-grocery segment is expected to grow into the largest category at $99 billion in gross merchandise value in the next decade.
The change in the ownership norms made it difficult for Amazon to bolster the relationship between Amazon.in, India marketplace and retailers in which it had stakes and were sellers on its platform.
Amazon had to remove Shoppers Stop from its website since it owns a 5 percent stake in the departmental chain and also Amazon Asia had to downsize its stake to 24 percent from 49 percent in Prione Business Services which operated Cloudtail, it’s largest vendor so that it remains eligible to sell on the marketplace.
This deal will also help Amazon compete more aggressively against Walmart-owned Flipkart as well as Mukesh Ambani’s newly proposed e-commerce venture.
With Amazon entering the Indian retail marketplace with such investments, the future seems bright for the e-commerce giant in the offline retail sector.