Amazon India in talks to acquire minority stake in grocery chain Spencer’s Retail

ASIA – Amazon has initiated talks to acquire a minority stake in India’s food and grocery retail chain, Spencer’s Retail as it seeks to penetrate the Asian market, two people mentioned by ET Retail to be familiar with the matter said.

Amazon is considering alliances for an established footprint in the country’s food and grocery segment.

According to experts, this strategy will likely unfold through Amazon’s Prime Now hyperlocal platform that promises two-hour to same-day delivery of food and grocery.

“Talks with Spencer’s on valuation and structure are currently ongoing,” said one of the two executives cited above.

“They are preliminary in nature, so we can’t be sure that the deal will go through.”

If the talks break through, Spencer will benefit from Amazon’s logistics network which is currently available in some areas of Mumbai, Delhi-National Capital Region, Hyderabad and Bengaluru.

Spencer, a subsidiary of RPSanjiv Goenka group’s flagship power unit which recently received National Company Law Tribunal (NCLT) approval for demerger of the business into four entities, including Spencer’s Retail, which will become a separate listed company.

The people with the knowledge of the matter, Spencer’s has plans to raise funds after it gets demerged with Goenka looking to dilute a minority stake.

Spencer Retail runs 128 stores in over 30 cities in large-format, hypermarkets and supermarkets, recording US$295.40mn in revenue in FY18, a US$4.23mn loss.

Spencer’s said it has plans to roll out 40 hypermarket stores in the next four years.

‘More’ stakes

Amazon is also in talks with the Aditya Birla Group on buying stakes in its More chain of stores through a partnership with Samara Capital and other investors to fully acquire the business.

It is also aiming for a minority stake in Kishore Biyani’s Future Group and with the three acquisitions, Amazon will have a stake in over 1,700 stores to effectively compete with Walmart-Flipkart and Reliance Retail.

The deals are structured by Amazon Inc’s mergers and acquisitions team in Mumbai along with Amazon India’s business heads in Bengaluru.

Amazon may look at full ownership in some of the chains if the foreign direct investment (FDI) rules on multi-brand retail get liberalised.

India allows 51% FDI in multibrand retail, while 100% is allowed in cash-and-carry ventures for wholesale-to-business entities such as neighbourhood stores and those with a business licence.

Also, India does not allow overseas investment in inventory-based ecommerce.

Amazon’s rival Walmart already owns and operates a chain of cash-and-carry stores in India apart from its recent takeover of Flipkart.

Alibaba, which has invested heavily in India in the payment and retail space through Paytm and BigBasket, is also seeking local retail partners in top domestic conglomerates such as Reliance and Tata.

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