Amazon To Buy 49% In Kishore Biyani’s Future Coupons, Values Future Retail At $5.8 Billion
Amazon.com Inc. will acquire an indirect stake in Kishore Biyani-founded Future Retail Ltd. as the Jeff Bezos-led firm plans to bolster its brick-and-mortar presence in one of the world’s fastest-growing retail markets.Amazon.com NV Investment Holdings—the investment arm of the U.S.-based retailer—will buy a 49 percent stake, comprising both voting and non-voting shares, in Future Coupons Ltd., a promoter group entity of Future Retail, according to an exchange filing.
As part of the agreement, Amazon has been granted an option to acquire all or part of the promoter shareholding in Future Retail, the operator of Big Bazaar supermarkets, it said. The U.S.-based company can exercise its option to buy promoters’ shareholding in Future Retail between the third and tenth year.
Future Coupons, which handles the digital payments, retail payments and coupon businesses of Future Retail, holds warrants in India’s second-largest retailer by turnover, issued at Rs 505 apiece. In February, Future Coupons, which also trades in fabrics, apparel, general merchandise and goods, had said it would acquire the stake at Rs 2,000 crore. It has paid Rs 500 crore upfront to Future Retail for the warrants. According to the market regulator’s norms, it will have to pay the remaining Rs 1,500 crore within 18 months. This will then give Future Coupons—which according to Brickworks Ratings reported a revenue and profit of Rs 46.3 crore and Rs 19 lakh, respectively, in 2018—a 7.3 percent stake in Future Retail.
Amazon will pay the outstanding Rs 1,500 crore for the 49 percent stake in Future Coupons and will get an indirect 3.58 percent stake in Future Retail, one person aware of the development told BloombergQuint, requesting anonymity. Biyani-controlled entities will own 50.8 percent stake in Future Retail on a fully-diluted basis.
The deal values Future Retail at Rs 768.5 apiece, a premium of 87 percent to Future Retail’s closing price on Aug. 22, according to BloombergQuint’s calculations. That aggregates to Rs 41,666 crore, or $5.8 billion. To be clear, the valuations have been arrived at based on the recently concluded preferential issue of warrants in Future Retail to promoter Future Coupons.
Also, the promoters have agreed to certain restrictions on share transfers and more importantly a right of first offer in favour of Amazon, all of which are subject to mutually agreed exceptions, the filing said.“It’s a win-win deal for both as Amazon gets access to one of India’s largest physical retailers and Future Retail gets access to cutting-edge technology platform, analytics and one of theof the world’s largest company as its partner,” Abneesh Roy, executive vice president (research) at Edelweiss, told BloombergQuint.
Amazon has been in talks with Future Retail to pick up a stake in the company as it looks to tap into India’s rising demand for household products and home-delivered fresh produce and vegetables. This is the American giant’s third such investment in India—it purchased an equity stake in Aditya Birla Group’s chain of retail stores More in September, and in Shoppers Stop in 2017.