‘Fu­ture’ tense as Ama­zon puts stake buy on hold

E-com­merce FDI norms cast a doubt on com­pany’s off­line re­tail plans, might af­fect More deal as well

Business Standard - - FRONT PAGE - KARAN CHOUDHURY

Global on­line mar­ket­place gi­ant Ama­zon has in­def­i­nitely put on hold its plans to buy stake in Kishore Biyani’s Fu­ture Group, it is learnt.

Ac­cord­ing to sources in the know, Ama­zon is also re­assess­ing the More re­tail chain stake buy, as it is at the mo­ment un­sure of In­dia’s re­tail cli­mate. The in­vest­ment arm of Ama­zon had set aside close to $2 bil­lion to in­vest in var­i­ous re­tail chains, to ex­pand its off­line foot­print.

Still as­sess­ing the dam­age caused by sud­den change in for­eign di­rect in­vest­ment (FDI) in e-com­merce norms, which forced it to overnight change its busi­ness strat­egy to be­come com­pli­ant, Ama­zon has de­cided to not con­tinue with its re­tail plans via stake buys till it man­ages to get clar­ity from the govern­ment.

Last year Ama­zon had been on an over­drive to ac­quire stakes in off­line re­tail firms and was hold­ing talks with mul­ti­ple play­ers. From RP-SG’s food and gro­cery re­tail chain Spencer’s Re­tail to Fu­ture Group, Ama­zon was plan­ning to buy mi­nor­ity stake in mul­ti­ple play­ers to in­crease its off­line re­tail pres­ence in the coun­try.

In Au­gust last year, the firm had signed a term sheet with Fu­ture Group to in­vest close to $700 mil­lion for a 12-15 per cent stake in the re­tail gi­ant. Sources said Fu­ture did not want the en­tire stake sale done for cash and was eye­ing some shares of Ama­zon In­dia which has a val­u­a­tion of around $16 bil­lion. The two sides had even started the ne­go­ti­a­tions on these finer points af­ter the term sheet sign­ing.

“There were talks hap­pen­ing for al­most the whole of last year. Things were mov­ing as planned and Ama­zon was to close the deal in the first quar­ter of 2019,” said a source close to Ama­zon.

“How­ever, af­ter the govern­ment sud­denly changed FDI in e- com­merce norms and did not give it the ex­ten­sion to Fe­bru­ary 1 dead­line to be­come com­pli­ant, Ama­zon is un­sure whether it makes sense spend­ing close to $2 bil­lion in buy­ing stakes in var­i­ous In­dian re­tail chains. For now, it is in a wai­t­and-watch mode and has ceased all talks of stake buy with Fu­ture Group,” said the source.

In Septem­ber last year, it ac­quired 49 per cent stake in Aditya Birla Group’s Aditya Birla Re­tail, which runs stores un­der the More brand. The bal­ance was picked up by home-grown pri­vate eq­uity fund Sa­mara Cap­i­tal for around $580 mil­lion.

While Ama­zon has se­cured an ap­proval from Com­pe­ti­tion Com­mis­sion of In­dia (CCI), no money has ex­changed hands in the deal. “Ama­zon’s global team is as­sess­ing the var­i­ous as­pects of In­dia op­er­a­tions. While they have got the CCI nod, there is no clar­ity on what the global team plans to de­cide next. Right now, its sta­tus quo,” added the source.

In­dia op­er­a­tions have been a cause of worry for the Jeff Be­zos-led tech­nol­ogy gi­ant. Ama­zon Chief Fi­nan­cial of­fi­cer Brian Ol­savsky in­di­cated dur­ing the call with an­a­lysts af­ter fourth- quar­ter re­sults said the com­pany is wor­ried about In­dia op­er­a­tions.

“There is much un­cer­tainty as to what the im­pact of the govern­ment rule change is go­ing to have on the e-com­merce sec­tor there. Our main is­sue and our main con­cern are try­ing to min­imise the im­pact to our cus­tomers and sell­ers in In­dia,” he had said.

Sources said that it was also plan­ning to in­crease its stake in Shop­pers Stop, from the present 5 per cent, but that plans has also been put on the back burner. Due to the new FDI in e-com­merce rules, Shop­pers Stop is no longer a seller on Ama­zon as it owns stakes in the re­tail chain.

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