Amazon may buy 10% in Future Retail for $600 mn, expand offline retail biz

The move comes days after Walmart acquired a majority stake for $16 billion home-grown e-commerce firm Flipkart at a valuation of around $20 billion.

Looking to expand and consolidate its presence in the Indian offline retail market, American e-commerce giant Amazon is in talks with Kishore Biyani-controlled Future Retail to acquire a 10 per cent stake in it, according to a FactorDaily.comreport.

The report comes days after Amazon's global rival Walmart acquired a majority stake for $16 billion in home-grown e-commerce firm and Amazon's main rival in India, Flipkart, at a valuation of around $20 billion. With an increased burden of competition from Flipkart because of Walmart's entry into the sector, Amazon is looking to make inroads into the offline retail sector to enhance its position in India's retail space.

Here are some of the details of Amazon-Future Retail deal as reported by FactorDaily.com :

1. Future Retail's valuation: The deal values Kishore Biyani's Future Retail, the company that owns brick-and-mortar retail outlets like Big Bazaar and Easy Day, at about $6 billion (Rs 40,872 crore).

2. Deal value: Amazon may spend around $500-$600 million to acquire a 10 per cent stake in Future Retail, whose market cap is around $4 billion.

3. Coping up with the competition: After Walmart's backdoor entry into India's e-retail sector through Flipkart, competition is expected to get fierce in the country's e-retail space. To expand its base in the Indian consumer market, Amazon is looking to enhance its business profile through the offline retail channel.

4. Amazon in India: According to a Citi Research report, Indian e-commerce sector is expected to be worth $202 billion in the next 10 years. Amazon is expected to be a major part of this growth, with a 35 per cent market share. The current valuation of Amazon India is pegged at $16 billion.

5. Amazon's previous investments in offline retail: Amazon had previously picked up a 5 per cent stake in Shoppers Stop for $26.35 million (Rs 179.25 crore).

6. Other buyers in the race: Amazon is not the only one eying a stake in Future Retail. Jack Ma's Alibaba and Walmart have also shown interest in it. Discussions are underway and any decision is yet to be taken.

7. What makes Future Retail a good investment target for Amazon? With a series of acquisitions, Biyani has consolidated Future Retail's business and it could be a perfect choice for Amazon to enter into the offline market. Future Retail has 773 stores across the country, Big Bazaar and Easy Day combined. As Amazon wants to build a food and grocery business, it can capitalise on the fact that Future Retail gets 35 per cent of its business from garments and grocery and has a large number of in-house brands in 68 categories.

Patanjali struggles to meet demand for products

Patanjali struggles to meet demand for products

Even as Baba Ramdev’s Patanjali Ayurved aims to double its turnover in the current financial year, it is struggling to meet the demand for its products.

Patanjali has signed exclusive deal with Future Group and sells its products through large hypermarkets such as D-Mart, Star Hyper and Reliance. Apart from this, Patanjali products are sold through a large network of shops, Ayurvedic stores and pharmacies. For instance, a store executive at Star Hyper, run by Trent-Tesco combine, said they had planned to set up a separate section for Patanjali products but couldn’t do so because of erratic supplies. “There’s no point in having a separate rack and displaying a few products on it,” said the executive.

According to a senior executive at a large retail chain, the fill rates of Patanjali products are in the range of 40-50 per cent. On the other hand, multinational consumer goods companies such as Nestlé and HUL have a fill rate of 85-90 per cent.

Fill rate in this case means the rate at which the goods are supplied by a manufacturer against a retailer’s order. To put it simply, if a retailer orders 100 products and the manufacturer supplies 90, then the fill rate is 90 per cent.(more)