Jeff Bezos can work with KM Birla to counter Reliance and Walmart in the retail trade

MUMBAI | NEW DELHI: Amazon, the world's largest online retailer, is working with Goldman Sachs and Samara Capital, a native private equity fund, to form a consortium for the acquisition of the supermarket and food chain chain Aditya Birla Group for more information about the valuation of companies. of Rs 4,500-5,000 crore, people aware of the development said.

Samara and Aditya Birla Retail Ltd, a private company of Kumar Mangalam Birla, signed an "exclusivity agreement" for bilateral negotiations at the end of June. ET published first in its June 30 issue that Samara and ABRL had concluded an exclusivity pact.

Samara, a mid-market India-focused fund, has in turn contacted Goldman Sachs and Amazon to join forces.

Goldman Sachs Special Situations Group is the likely vehicle within the investment bank for this transaction. The trio intends to float a separate company or special purpose vehicle in which Amazon has a 49% interest as the strategic partner & # 39; will take. The final structuring exercise is still running for a formal announcement at the end of this month or the beginning of the following month.

According to Indian foreign investment laws, foreign companies can hold up to 49% in multi-brand stores such as More. However, foreign companies generally overcome this hurdle by creating holding companies in the self-service wholesaler, where 100% overseas ownership is permitted. These in turn allow Indian groups and entrepreneurs to run the front-end stores as their franchisees.

Samara had a similar contract when she acquired a majority stake in Pharma Retailer Guardian Nutrition in 2008 with Ashutosh Garg, whose company ran the pharmacy chain.

Similarly, the Swiss Private Equity House Partners Group together with the domestic fund Kedaara Capital has started to purchase Vishal Retail from TPG and Shriram Group for approximately Rs 5.000 crore in May.

Amazon, Goldman Sachs and Samara & # 39; s founder Sumeet Narang refused to comment. "It is not our policy to comment on market stories," said a spokesperson for Aditya Birla.

These developments take shape when online and offline enter each other's territories as part of an omnichannel strategy and to combat shrinking retail margins.

If the deal continues, More will be the second direct investment in India's physical retail space by Amazon after taking a 5% stake in India & # 39; s largest publicly traded chain store Shoppers Stop in September last year Rs 180 crore. It shocked the American supermarket sector earlier this year with its unexpected purchase of Whole Foods with total revenues of $ 13.7 billion.


Loss-making More is the fourth largest chain operator of supermarkets in India and the acquisition would strengthen the Seattle-based e-commerce giant in its presence in food and food businesses, especially after rival Walmart Inc. from online store Flipkart for $ 16 billion. Amazon's own plans to launch a full-owned food retail business in India was a non-starter due to lack of clarity in the policy, even after approval to invest $ 500 million in a subsidiary that could produce locally produced and packaged food. sell both online and offline. Founder Jeff Bezos has already invested in Rs 100 crore ($ 14 million) in that company (Amazon Retail India Pvt.).

ABRL ended the last fiscal year with 493 supermarkets More branded and 20 hypermarkets, which cover more than 2m sqft retail space and is currently behind Future Group, Reliance Retail and DMart in terms of the number of such sales outlets. More has a greater concentration and part of the organized retail trade in the southern states of Karnataka, Andhra Pradesh and Telangana, where more than half of the stores are located.

ABRL, 99.99% owned by Birla promoter entities such as Kanistha Finance & Investments Pvt and RKN Retail Pvt Ltd, reported an increase of 20% in FY17 sales to Rs 4,194 crore, with the net loss reduced to Rs 644 crore. The company, however, had a debt of approximately Rs 6,573 crore on its books and the financing costs amounted to Rs 471 crore for the year. After a significant reduction in activities, the company had reached breakeven on EBITDA at the store level (profit before interest, taxes, depreciation and amortization).

The chain adopted a "go-deep-not-wide" strategy for its supermarket business and focused on core markets such as Hyderabad, Bengaluru, Chennai, Pune, Kolkata and the National Capital Region, which are located close to the distribution. centers.

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<p>  <strong> BOOST TO OMNICHANNEL [India] </strong><br />
<br />  The digital economy of India, ready in 2025 $ 1 trillion, has already attracted the largest retailers from all over the world and meanwhile, Mukesh Ambani intends to build a hybrid, "online-to-offline new omnichannel commerce platform", in which shopping together with Reliance Jio is combined.
<p>  With Walmart now withdrawing with a takeover, Amazon recently invested another 2,700 crore ($ 386 million) in its Indian unit, bringing the total investment in the country to around $ 4 billion in five years' time. original $ 5 billion commitment.
<p>  Alibaba, which has invested a lot in India in the retail and payment space via Paytm and BigBasket, is also looking for local retail partners between legendary domestic conglomerates such as Reliance and Tata.
<p>  With the IPO institution of DMart as a valuation benchmark for many, Birla decided to spend money to address the liquidity problems of the group. The $ 41 billion aluminum-to-mobile telephony conglomerate entered the supermarket retail trade after it had taken over a smaller retail chain, Trinethra Retail, a few tenths of a century ago.
<p>  More has tried to raise the private equity capital at least twice before, but failed.
<p>  Birla has also restructured its retail business by manufacturing the clothing department Madura Fashion and Lifestyle from Aditya Birla Nuvo and merged it a few years ago with the listed Pantaloon Fashion and Retail Ltd to create the country's largest designer clothing company through sales and number of stores.<br />
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