According to the sources, Amazon, the largest online retail shop of the world till date, will have collaboration with Goldman Sachs and domestic private equity fund Samara Capital. The main objective of this venture is to create an association for the possession of ‘More’, the food and grocery supermarket chain owned by the Aditya Birla Group. The estimated enterprise value of the undertaking is Rs 4,500-5,000 crore.
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Planning among the trio
Aditya Birla Retail Ltd is a private company owned by Kumar Mangalam Birla. The latest news says that the company has signed a special contract with Samara Capital at the end of June for the purpose of mutual cooperation. Samara Capital, in turn, has approached Goldman Sachs and Amazon to connect services. A separate company or a special purpose vehicle is very likely to be formed by the trio where Amazon will retain an investment of 49% as the strategic partner as the overseas companies can hold only up to 49% in multi-brand dealers like ‘More’, according to the Indian overseas investment laws. The formal announcement is expected to be made at the end of this month or early next month as the ultimate structuring exercise is still going on. However, no comment has yet been made by the owners of Amazon, Goldman Sachs, or Samara.
Competition in the international arena
Previously, Amazon has planned to launch a fully-owned food retailing business enterprise in India and has received an approval of investing $500 million. The investment was to be made to a subsidiary that was permitted to trade locally produced and packaged food and groceries, both online and offline. Due to some ambiguities in the policies, the venture had no chance of succeeding or being effective. However, founder Jeff Bezos has already fixed his eye on the 4th largest grocery and food-chain of India in order to beat the international rivals like Walmart Inc. who has recently bought out online retailer Flipkart for $16 billion and the homegrown rivals like Reliance.
The omnichannel strategy
According to the experts, online and offline retail territories are trying to merge in an attempt to fight the lessening retail margins, resulting in the development of the omnichannel strategy. If this endeavor successfully takes shape, ‘More’ is going to be the second direct investment by Amazon in the brick-and-mortar retail space in India, only after Shoppers Stop.
India becoming the international economic attraction
The large-scale retailers from across the world have already been attracted to the digital economy of India that is on the edge of crossing $1 trillion by 2025. In the meantime, Mukesh Ambani plans to put up a crossbreed, “online-to-offline new omnichannel commerce platform” mingling shopping in conjunction with Reliance Jio. It is only recently that Amazon has invested an additional $386 million (Rs 2,700 crore) in its Indian unit, making a total of $4 billion of investment in this country in the time span of 5 years, while Walmart has already started moving in with a headline-grabbing acquisition.
Whether or not this tie-up is going to work will only be revealed by the future. For the time being, the Indian customers can simply wait and expect the best to come.
