Future Retail’s latest tie-up with e-commerce giant Amazon will help the Kishore Biyani-firm not only reach out to a wider customer base, but also help it keep customers amid the trend shift of shopping from offline to online. Future Retail is expected to accelerate its sales and implement its ‘online-to-offline’ strategy, riding on the back of Amazon’s global leadership in online retailing, Fitch Ratings said in a research note. As part of Amazon India’s acquisition of a 49 per cent stake in Future Coupons, Jeff Bezos-company will become an authorised online sales channel for Future Retail stores. Future Coupons has a minor stake in Future Retail.

Fitch Ratings expects that with additional sales from Amazon, Future Retail’s sales can grow 14-20 per cent in the next three years. Currently, Future Retail has over 350 million footfalls across its retail network, and Amazon India’s marketplace will enable it to reach a wider customer base, the firm said in a statement. While working closely with Amazon, the company will develop marketing and promotion initiatives and use Amazon’s technical expertise and resources to leverage the reach of its brands. As the retail store moves online, the existing store infrastructure can be used for packaging and pickup of products ordered online.

Consumption expenditure in India has grown at an average annual rate of around 7 per cent from 2012 to 2016 and is expected to grow at a CAGR or 9 per cent until 2020. Reflecting this trend, same-store sales growth at two of FRL’s leading chains Big Bazaar and FBB has grown up to 14 per cent during FY15-FY19. With the recent deal with Amazon, Future Retail will ensure positioning of its relevant stores and programmes on the Amazon India marketplace. “We expect organised retailers, such as [Future Retail], to benefit from consumers’ shift away from informal retailers, which make up around 90 per cent of the Indian retail market, as convenience and selection become more important,” Fitch said in its report.

According to Fitch ratings, Future Retail’s capital expenditure can range between Rs 7 billion and Rs 10 billion by FY23 while EBITDA margins are also expected to improve by 3 percentage points in FY21. As a result, the ratings agency has maintained ‘positive’ outlook for the company’s credit profile. Moreover, the company has Rs 37.53 billion in committed, but unused facilities. This free cash flow is likely to further boost liquidity within the company.