Google, Paytm Mall may join hands to buy stake in Kishore Biyani's Future Retail
BusinessToday.In August 27, 2018
Three months after e-commerce giant Amazon showed interest in picking up a 10 per cent stake in Kishore Biyani's Future Retail Limited (FRL), and has even submitted a term sheet, yet another US-based behemoth has reportedly come calling.
According to The Economic Times, Google is looking to team up with Alibaba-backed Paytm Mall to pick up a 7-10 per cent stake in Future Retail for Rs 3,500-4,000 crore. Citing a source in the know, the report added that a private equity fund, whose identity could not be ascertained, may also join the consortium.
Biyan told the daily two weeks ago that he was likely to close a deal with a foreign investor in the next two months on the back of a database based on nearly 500 million customers visiting his stores annually. The fund infusion will be through both primary and secondary share sale, which may even see some of the existing Future Retail shareholders get diluted further. "We can't sell more than 10 per cent and foreign portfolio investor (FPI) is the only route available," he had added.
As per Indian laws, a single foreign entity can acquire up to a block of 10 per cent in an Indian multi-brand retailer. Moreover, an Indian company can dilute up to 49 per cent stake to multiple FPIs.
The development comes against the backdrop of increased competition in the retail landscape. Biyani recognises the need for alliances to take on deep-pocketed online and offline retailers such as Reliance Retail, Amazon and Walmart-Flipkart in the battle for the red-hot pie. After all, India's retail market is expected to mushroom by 60 per cent to reach US$ 1.1 trillion by 2020, on the back of factors like rising incomes and lifestyle changes by middle class and increased digital connectivity.
The reason FRL is generating such interest is mainly its pan-India footprint. In its Q1FY19 investor presentation, the company pointed out that it boasts 1,123 retail stores spanning 14.8 million sq.ft spread out across 339 cities as of end June. Moreover, its latest quarterly numbers show a 3.56 per cent rise in net profit at Rs 153.12 crore, against a net profit of Rs 147.85 crore in Q1FY18.
Google, meanwhile, is reportedly keen to bring Google Express - the company's online shopping platform - to India. Google Shopping is already providing a medium for hyperlocal grocery delivery companies like Big Basket and Grofers.
Taking its interest in the country's online-to-offline startup space further, Google invested in Mumbai-based startup Fynd in March, just three months after it led a $12 million funding round in hyperlocal concierge and delivery company Dunzo. These investments are being viewed as part of Google's 'Next Billion Users' push, as it seeks to build an ecosystem in India.
Future Group nurses omnichannel ambitions too. Last November FRL had unveiled a 30-year vision, Retail 3.0, to chart its course to becoming Asia's largest integrated consumer retailer by 2047 with revenue of in excess of $1 trillion. This blueprint was reportedly modelled on Alibaba co-founder Jack Ma's "New Retail" theory, which seeks to redefine e-commerce by enabling seamless engagement between the online and offline world.
And obviously, Alibaba-backed Paytm Mall has long been betting on the offline-to-online strategy through its QR codes feature. According to the daily, the company is aiming for a near-threefold rise in annualised gross sales to $10 billion by March 2019, a massive jump from the $3.5 billion it had notched up in June.
The competition in the omni-channel space heats up further when you factor in Reliance Industries' plans to create a "hybrid, online-to-offline new commerce platform" and the recent buzz about Amazon's interest in acquiring Kumar Mangalam Birla's supermarket chain More. Interestingly, this development made headlines just a day after the world's biggest brick-and-mortar retailer Walmart completed its acquisition of e-tailer Flipkart. Clearly, the battlelines are no longer drawn up between online and offline players as both try to combat shrinking retail margins.
Reacting to the news the stock of FRL soared around 6 per cent over the previous close in intraday trade today.
With PTI inputs
Edited By Sushmita Choudhury Agarwal