Omni-channel trade set to take off with Future deal China to slap 10% tariffs on $75 bn of US exports

Amazon to get access to 1,600 stores under Future brands

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Omni-channel trade is set to take off in the market as the biggies in physical retail and e-commerce get into a triangular fight. Amazon and Future group have joined hands to give a tough fight for the Walmart-Flipkart combine and Reliance, which is devising a major omnichannel strategy.

Amazon picked up 49 per cent stake in Amazon Coupons and 3.6 per cent stake in Future Retail indirectly. It also has the option to acquire another 47.02 per cent stake in Future Retail in the future.

Future Coupons, a promoter entity, was issued 3.96 million warrants by Future Retail in April. These warrants when converted into equity will make for 7.3 per cent stake in Future Retail. By picking up 49 per cent stake, Amazon has indirectly acquired 3.6 per cent stake in Future Retail, for a likely consideration of Rs 1500 crore. Future Coupons was issued the warrants for Rs 2000 crore, of which it had paid Rs 500 crore in April. Possibly Amazon would With massive fall in share price of individual companies in the current market meltdown, Sebi should allow promoters to acquire have paid the remaining Rs 1500 crore.

“While at this juncture we are not sure of the exact valuation at which Amazon will pick stake in Future Retail, our base assumption is that balance Rs 1500 crore which Future Coupons was to infuse is the quantum that Amazon would have infused. Factoring this, we arrive at an implied acquisition price of Rs 773, a 53.2 per cent premium to the warrant conversion price of Rs 505,” said Abneesh Roy, Executive Vice President, Institutional Equities, Edelweiss Securities.

The valuation of Future Retail has doubled to Rs 42,000 crore with this transaction against the current market cap of Rs 21,000 up to 10 per cent stake through creeping acquisition in a year, by relaxing the current 5 per cent limit, feel market analysts.

The shares of Mid-Cap and Small-Cap companies have seen huge price erosion in crore.

As part of the deal agreement, Amazon will have a call option to acquire all or part of the promoters' shareholding in Future Retail of 47.02 per cent between the third and tenth year of the transaction and it will be subject to law. In future, Amazon can own 47.02 per cent in Future Retail apart from 3.6 per cent through Future Coupons. Amazon had to take an indirect route through Future Coupons due to the current FDI rules for e-commerce entities.

With this partnership, Amazon will get access to around 1600 stores of Future Retail under Big Bazaar, Easy Day, Nilgiris and Heritage brands and recent times and some of its has been due to heightened pessimism over economic slowdown rather than deterioration in fundamentals of the company.

Raamdeo Agrawal, MD and co-founder, Motilal will help shorten the delivery time, especially in case of fresh food and grocery. Future Retail has started piloting its omni-channel through its NCR stores. FRL will benefit from Amazon’s cutting edge technology platform, analytics as well as sector knowledge and expertise, said Roy. Amazon will also provide a strong sales channel for Future Consumer’s private label products and Future Lifestyle Fashion’s apparels.

Further, the transaction will help Future Group prune its pledged shares over a period of time. Future Retail, Future Lifestyle Fashion and Future Consumer have 51.5 per cent, 26.4 per cent and 61.1 per of their promoters shares pledged.

With this deal, omnichannel will get big push in Indian retail market. After buying Flipkart,Walmart is also looking at having a partnership with a physical retail chain. Relaince on the other hand has a wide network of retail stores, a strong telecom network under Jio and is looking at joining hands with kirana stores for its omni-channel trade. Oswal Financial Services in a tweet on Thursday said, “I have not seen wealth destruction like we have seen now in my 40 years in the market.”

Kishore P Ostwal, CMD, CNI Research, engaged in Beijing, Aug 23

China on Friday said it will impose additional 10 per cent tariffs on $75 billion worth of US exports in retaliation to President Donald Trump's threat to impose new tariffs on $300 billion worth of Chinese imports as trade war between the top two economies continues to intensify.

Since the commencement of trade war last year China and US have so far hit each other with punitive tariffs covering billions of dollars in two-way trade.

Trump kicked off the trade war demanding China to reduce massive trade deficit which last year climbed to over $539 billion. He is also insisting on China to workout verifiable measures for protection of intellectual property rights (IPR) technology transfer and more access to American goods to the Chinese markets.

On Friday China's Customs Tariff Commission said that Beijing will impose additional tariffs on US imports worth about $75 billion in response to the newly announced US tariff hikes on Chinese goods, the state-run Xinhua news Small and Mid-Cap stocks research said, “Sebi has raised open offer limit from 15 per cent to 25 per cent for a hostile takeover, now it should also raise 5 per cent creeping acquisition limit as in such a market condition agency quoted Commission as saying.

Also, China will resume imposing additional tariffs of 25 per cent or 5 per cent on American-made vehicles and auto parts starting from 12:01 pm December 15, another announcement said.

The US government had announced on August 15 that it will impose additional tariffs of 10 per cent on Chinese goods worth about $300 billion effective on September 1 and December 15, respectively, in two batches.

The US move has led to a further escalation of bilateral trade frictions, greatly damaging the interests of China, the United States and other countries, and also gravely threatening the multilateral trading system and free trade principles, the statement said. the when the foreign portfolio investors are selling and stocks are seeing heavy price correction companies can face hostile take over. Cash rich promoters can thwart any takeover bid by raising their stake.”