One of India’s top industrial conglomerates, the Aditya Birla Group has decided to sell its supermarkets chain ‘More’ and the buyers are Samara, an Indian equity fund and Amazon, the US ecommerce giant betting big on India. The unofficial figure being quoted for the deal is Rs 42 billion of which Rs 40 billion will be debts on the books of Aditya Birla Retail Ltd (ABRL), the holding company.
According to the sources quoted in the story appearing on Business Standard, the Birlas will end up losing a whopping Rs 70 billion in this offline retail venture in which they had made investments to the tune of Rs 110 billion through both equity and debt.
Included in this loss will be the amounts totaling Rs 10 billion which some of the group companies had lent to ABRL and will now have to be written off since it won’t be absorbed by the buyers in the deal. The last published results of the company showed a carried over debt of around Rs 67 billion but this was a year ago. One would presume it would have only gone up by now, though the company has been closing down several stores for some time now.
While the exact nature and extent of financial commitment Amazon has made within this deal is not disclosed yet, it is learnt that the two holding companies of ABRL, RKN Retail and Kanishtha Finance and Investment, sold almost 100% in the company to Witzig Advisory Services, a back-end company owned by the Samara Alternative Investment Fund.
‘More’ is currently running 290 departmental stores and 20 hypermarkets across the country. For Amazon, this should be a god-sent opportunity since it can jump on to the offline platform and gain some points over rival Walmart-Flipkart and it is an ongoing business. To add to this, Amazon has already taken a foothold in the offline space by joining hands with the Kishore Biyani promoted Future Group (Big Bazaar) and may end up owning up to 15% stake there.
Going back to ABRL, observers feel the stores have turned individually profitable but the debts were mainly due to certain management decisions of the past, including the acquisition of Trinetra, a supermarket chain in the south, Fabmall and Jubiliant Retail’s Total Superstore.
‘More’ may be poised for a quantum leap under the new management.