By Prarthana Mitra
E-commerce giant Amazon is getting a major leg-up in the grocery retail sector, having recently acquired a stake in the Aditya Birla Group-owned More. While Samara Alternative Investment Fund-owned Witzig Advisory Services is buying controlling stake in the company, Amazon in partnership with Samara Capital will purchase a 49% stake in the Mumbai-based food-and-grocery chain, over a deal worth Rs 4,200 crore ($582 million).
“In order to achieve full potential, ABRL needs a strong balance sheet and continued large investments. Keeping in mind the group’s capital-allocation priorities and ABRL’s needs, I believe that at this stage, it serves the best interests of the business to opt for an external investor,” Aditya Birla Group chairman Kumar Mangalam Birla told employees in the mail.
Touted as their biggest investment in India so far, this is believed to help fuel Amazon’s aspiration to be a bigger player in the $400-billion sector and comes in the wake of Walmart’s mega-acquisition of Flipkart. More is India’s fourth largest supermarket chain after Future Group’s Big Bazaar (which is also on the purchase cards), Reliance Retail and DMart. Amazon was not the only conglomerate in contention; according to rumours, Goldman Sachs also too was looking to acquire More, in association with Samara Capital.
Rapid expansion on the cards
Amazon will initially buy 35% in the retail chain from Samara AIF and will raise it to 49% over time, according to sources close to the development. Amazon intends to increase the number of More outposts from the existing 500 branded supermarkets and hypermarkets, by adding at last 100-150 stores every year. The target for the current fiscal is to add 90 stores, a source added. Samara-Amazon plans to stick to the current management team, with ABRL’s Pranab Barua as the director of the acquired entity and Mohit Kampani continuing as the CEO.
“Since the backend company where Samara and Amazon are investing has no restriction on FDI (foreign direct investment), there is no problem,” one of the executives told the Economic Times. Thus, there is no need for individual permits from state governments to operate More stores, usually a requirement under multi-brand retail foreign direct investment (FDI) rules.
It could also mean more grocery deals and discounts for Amazon Prime members and logistical improvement for Amazon’s pantry services. Amazon has been trying to solidify their offline presence for a long time, which began with their acquisition of Whole Foods and 5% in Shoppers Stop last year. Now with More in their pockets, Indian e-commerce users can expect rapid expansion and improvement in online and offline grocery delivery services.
Prarthana Mitra is a staff writer at Qrius.
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