Amazon's push to acquire 10 percent in Future Retail begins

Future Retail share price falls as Amazon set to acquire minority stake in Kishore Biyani firm

Future Retail has more than 1500 stores, including Big Bazaar, across 437 Indian cities and towns.

"Amazon has agreed to invest in Future Coupons Limited, which is engaged in developing innovative value-added payment products and solutions such as corporate gift cards, loyalty cards, and reward cards primarily for corporate and institutional customers", the company added.

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. According to sources, the stake in Future Coupons by Amazon is being picked up for about Rs 1,500 crore, giving the company a market capitalization of over Rs 20,700 crore. However, it is interesting to note that by way of this transaction, Amazon will also get a stake in Future Group's brick and mortar entity Future Retail Limited.

Pursuant to these agreements, Amazon has agreed to make an equity investment in Future Coupons for acquiring a 49% stake comprising both voting and non-voting shares, the company said. "People had bought on expectation, and now are selling on the news". Post the conversion of warrants, Future Coupons will hold a 7.3 per cent stake in Future Retail and Amazon by virtue of being a stakeholder of 49 per cent, would be entitled to a 3.5 per cent stake in Future Retail.

Amazon yesterday launched Amazon Fresh, a two-hour grocery delivery service for select pin-codes, in Bangalore.

Future Retail runs the popular Big Bazaar chain, FBB, Food Hall, among others.

The Future Retail transaction marks Amazon's second such move to acquire a stake in an Indian supermarket store operator. India's modern retail market will more than double to $188 billion by 2023 from $79 billion previous year, according to consultant Technopak Advisors. The deal between Amazon and Future Group is part of the former's strategy to leverage India's offline grocery and household segment. Amazon gets access to one of India's largest physical retailers, database while Future Retail gets access to India's leading E-commerce player, cutting edge technology platform, analytics and one of the World's largest company as its partner.

India's revised e-commerce regulations, along with its push to compel multinationals to store data locally, have irked the USA government and heightened trade tensions.

The developments come in right before Reliance Jio makes its reported entry into e-commerce.

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