Amazon Indirectly Buys A Stake In Future Group; Ecommerce Battle Against Walmart, Paytm Intensifies

xAmazon with a turnover of $135 billion has come a long way since it was launched in 1995. With huge turnover, it has become a leader in online sales.

In the mid of this month we heard news about Amazon acquiring stake in future retails.

So finally e-commerce giant Amazon has decided to acquire a 49% stake in Future Coupons led by Mr. Kishore Biyani (founder and chief executive officer of Future Group)

Acquisition Summary

Amazon has invested more than $6 billion in India’s developing online market.  

With this partnership with Future Groups, It would enhance Amazon’s existing portfolio of investment into Indian economy.

Since Amazon cannot directly buy stake from Future Retails so it is routing it through its subsidiaries Future Coupons. It owns about 7.3% stakes in Future Retail (as per old regulatory filing quoted by TechCrunch).

Future Retail serves millions of customers in more than 400 cities through over 2000 stores. Most trusted retail brands are housed by this company like Big Bazaar, Easy Day and many more.

This deal is likely to be valued around Rs 1500 crore. This deal will give Amazon a 3.58% stake in Future Retail. The financial details of this transaction are still being disclosed.

“Pursuant to these agreements, Amazon has agreed to make an equity investment in Future Coupons Limited for acquiring a 49% stake comprising both voting and non-voting shares. As part of the agreement, Amazon has been granted a call option,” Future Retail said in a filing (PDF) to the local stock exchange.

Their spokesperson said that this investment will be engaged in developing innovative value added payment products and solutions like gift cards, reward cards and loyalty cards for corporate and institutional customers.

Future Retail has approved the allotment and issuance of 3.96 million warrants to Future Coupon for Rs 2000 crore on March 5^th 2019. FRL received 25% of the value around Rs 500 crore of warrant issue price from Future Coupons. Warrant conversion can be done any time during the period of 18 months from the date of allotment.

Amazon On Spree Of Acquisition

Lately Amazon has shown keen interest in retail industry of India. We also heard news of Amazon buying Uber Eats and entering in food delivery business too.

It is expected that this deal with Future Retail would be similar to the deal between Walmart and Flipkart where we see partnership between retail and e-commerce duo.

We all know the rivalry between the two e-commerce giants Amazon and Walmart in Indian. To give it a strong competition, Amazon is ramping up its game by acquiring many offline retail businesses.

There has also been news of e-commerce rules revision by the government of India, which created hurdles for e-commerce subsidiaries like Amazon and Flipkart. So Amazon has to alter its equity holding structure to abide by these rules.

India’s revised e-commerce regulation compels multinationals to store data locally, which was frowned upon by the US government. While Indian government explained to them that this is to protect the interest of small traders and privacy of citizens.

Spokesperson from Amazon said that e-commerce can actually accelerate India’s economy if it is allowed to thrive.

In reality, e-commerce holds less than 3% share of total retail consumption while Indian government has to protect the interest of small businesses and traders which holds a big part of the economy.