Aditya Birla Group is selling More - a chain of retail stores, after having struggled to make a success of it.
The deal’s been struck with Samara Alternative Investment Fund for an enterprise value of Rs 4,200 crore, according to people familiar with the deal. No official statement on this was available from either party.
Aditya Birla Retail Ltd. has a chain of 509 supermarkets and 20 hypermarkets across India under the ‘More’ brand. RKN Retail Pvt. Ltd., and Kanishtha Finance & Investment Pvt. Ltd., holding companies of billionaire Kumar Mangalam Birla and family, own approximately 62 percent and 37 percent stake in the venture, respectively.
The two holding companies will sell their stake to Witzig Advisory Services, owned by Samara.
While the media statement issued by RKN said Witzig is “owned and controlled” by Samara, people familiar with the deal told BloombergQuint that Amazon may also be involved in this transaction via an ownership interest in Witzig.
Amazon’s interest in More was earlier reported on by Economic Times and Mint.
Amazon and Samara Capital have agreed to co-invest in Witzig, the U.S.-based retailer confirmed in response to BloombergQuint’s emailed queries. “Through this investment, Amazon looks to enhance its services portfolio, and meaningfully invest in and create opportunities for skill development and job creation…Both Samara and Amazon see significant growth potential,” it said.
Foreign retailers can own up to 49 percent in Indian peers, according to India’s foreign direct investment policy. The policy was formulated by the UPA government in the face of considerable opposition from the BJP. Since it has come to power the BJP has not rolled back the policy but no deals have taken place due to prevailing ambiguity on approvals.
Aditya Birla Retail has a negative net worth due to operational losses. Its debt as of April 2017 stood at Rs 6,455.8 crore. Although the retailer’s store count has increased since June 2016, the company resorted to cost-cuts by renegotiating rents and reducing store size to narrow its operating loss, the credit rating agency ICRA Ltd. said in a report.
$1.1-Trillion Retail Opportunity
Last year, Amazon through its subsidiary Amazon.com NV Investment Holding LLC picked up 5 percent in Shoppers Stop Ltd. for Rs 179.3 crore.
Amazon isn’t alone in aspiring to build an omni-channel network in India.
Just a month ago U.S. retail giant Walmart Inc. completed the acquisition of India’s largest e-tailer Flipkart for $16.7 billion.
Billionaire Mukesh Ambani’s Reliance Retail Ltd., Kishore Biyani’s Future Group and billionaire Radhakishan Damani’s Avenue Supermarts Ltd. that runs D-Mart stores are also exploring different ways to take orders online and deliver at customers’ doorstep.
India’s retail opportunity is massive and the market is estimated to grow from the present $672 billion to $1.1 trillion by 2020, said a report by Assocham and MRRSIndia.com. Retail sales through super and hypermarkets, according to government-backed think tank India Brand Equity Foundation, are expected grow at 20 percent— twice the pace of traditional trade—over the next decade as the economy formalises.
(Updates an earlier version with Amazon’s comments)
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