Amazon.com Inc and Indian private equity firm Samara Capital have bought Aditya Birla Group’s food and grocery retail chain ‘More’ for an enterprise value of around Rs 4,200 crore. More is the country’s fourth largest retail chain after Future Group’s Big Bazaar, Reliance Retail and DMart.
The board of Aditya Birla Retail (ABRL) on Wednesday gave its approval to the deal as per which private equity fund Samara Capital acquired the majority 51% in ABRL, while Amazon’s investment arm, Amazon.com NV Investment Holdings, bought the balance 49%, sources said.
An Aditya Birla Group spokesperson confirmed that the deal has been signed but declined to give any further details. When contacted, an Amazon spokesperson declined to comment.
The deal needs to be cleared by the Competition Commission of India.
Samara’s investment is through its alternative investment fund, Samara AIF, and since it is sponsored and managed by Indians it will be considered a domestic investment according to the rules, sources said.
As per the country’s foreign direct investment rules, 51% FDI is allowed in multi-brand retail while 100% FDI is allowed in cash-and-carry ventures.
The deal will help ABRL clear its debt of around Rs 4,000 crore as on March 2018.
With the acquisition, the new owners of More will expand its chain which had got stalled due to the company’s high debt. It is likely that 100-150 stores will be set up every year. Currently More has 575 stores.
Sources said that the existing management team will continue to run the company.
In FY18, ABRL for the first time posted positive earnings before interest taxes depreciation and amortisation of Rs 1 crore. The company’s revenue for the fiscal was Rs 4,400 crore, up 5%, while its losses narrowed to Rs 490 crore.
Analysts said that fashion businesses and food and grocery businesses are witnessing renewed interest as big overseas companies are looking for acquisitions in the domestic market to grow faster.
Arvind Singhal, chairman, Technopak, said, “We will see more foreign investors investing in the retail sector and food and grocery is turning out to be a segment where the big giants like Amazon, Flipkart, Reliance, Future Group all are competing and want to establish themselves. Also a deal size of around Rs 4,000 crore is not that small and would turn out well for Amazon.”
More stores would add value for Amazon’s omni-channel strategy. Amazon is already into food and grocery retailing through its platform, Amazon Prime Now. Prime Now is currently limited to locations like Mumbai, the National Capital Region, Hyderabad and Bengaluru.
Till August, Samara Capital which had signed an exclusivity agreement with ABRL in June, was in negotiations with both Amazon and Goldman Sachs to form a consortium to acquire ABRL. But Goldman Sachs eventually exited the consortium.
More will be Amazon’s second direct investment in India’s brick-and-mortar retail space after it acquired 5% stake in department store chain Shoppers Stop for about Rs 180 crore in September last year.