India Markets closed

Amazon picks up 49 per cent in Future Retail promoter

Pranav Mukul
Amazon has agreed to make an equity investment in Future Coupons Limited for acquiring a 49% stake comprising both, voting and non-voting shares, Future Retail said in a release to the exchange. (Image: Reuters)

Global online retailer Amazon has entered into an agreement to purchase 49 per cent stake in Future Coupons the promoter entity of Kishore Biyani-led Future Retail, which operates Big Bazaar supermarkets. This could help the US-based firm to tap into India s household and grocery retail segment.

Amazon has agreed to make an equity investment in Future Coupons Limited for acquiring a 49 per cent stake comprising both, voting and non-voting shares, Future Retail said in a release to the exchange. The company did not disclose the financial details of the deal. Further, as part of the agreement, Amazon has been granted a call option, which allows Amazon to acquire all or part of the promoters shareholding in Future Retail and is exercisable between the third and tenth years, in certain circumstances, subject to applicable law, the company said. In March this year, Future Retail had approved the issuance and allotment of 3.96 million warrants to Future Coupons, and the conversion of warrants can be exercised at any time during the period up to 18 months from the date of allotment.

The deal comes barely over a year after another US retail giant Walmart picked up controlling stake in an Indian retailer Bengaluru-based e-commerce firm Flipkart. Walmart purchased majority stake in Flipkart for $16 billion. The deal between Amazon and Future Group is part of the former s strategy to leverage India s offline grocery and household segment. Last year, Amazon, along with private equity firm Samara Capital, picked up stake in Aditya Birla group s food and grocery retail chain, More.

In 2017, Amazon had purchased 5 per cent stake in departmental store chain Shoppers Stop.

Currently, the Indian retail market is dominated by the unorganised retail accounting for about 88 per cent of the total retail market while organised market is valued at about $95 billion, only about 12 per cent of the sector. E-commerce stands at about $24 billion, accounting for about 25 per cent of the organised market or 3 per cent of the total retail market in India. India s organised retail penetration is much lower compared with other countries, such as the US which has organised retail sector penetration of 85 per cent.

According to a report by CARE Ratings, food & grocery segment accounts for over 88 per cent of sales in the unorganised sector but only 2-3 per cent in the e-commerce sector, thus having a huge potential for e-retailers to expand further into the segment.

In 2017, the erstwhile Department of Industrial Policy and promotion (DIPP) had approved Amazon s proposal to invest about $500 million to build out a food retail business.

Thursday, Amazon India announced launch of Amazon Fresh store which will allow customers get daily essentials delivered in two hours in Bengaluru. The development comes amid intensifying competition between Amazon and Walmart-owned Flipkart. Both the players are betting aggressively on the online grocery space.

The Amazon Fresh store will serve a complete grocery experience across fruits and vegetables, dairy, meat, ice-creams, and dry grocery with 2-hour delivery slots powered by Prime Now from 6 AM to midnight on, the company said in a statement. The deliveries are powered by Amazon s Prime Now service which was earlier available only on the separate Prime Now app, it added. The Prime Now app will continue to serve customers in Delhi-NCR, Mumbai, Bengaluru and Hyderabad, it said.

With Amazon Fresh, customers can experience the convenience and speed of ordering daily essentials on Now, customers can order the freshest fruits and vegetables as well as everyday grocery and get it within 2 hours. We are starting this service in Bengaluru and will soon roll this out to customers in other cities, Amazon India director – category management Siddharth Nambiar said.