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SHOPERSTOP - Shopper's Stop News Story

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Sector
Consumer Cyclicals
Size
Small Cap
Market Cap £147.0m
Enterprise Value £353.8m
Revenue £354.0m
Position in Universe 566th / 3000

UPDATE 1-Amazon to acquire minority stake in an Indian supermarket chain operator

Fri 23rd August, 2019 6:47am
* Amazon.com to acquire a 3.58% stake in India's Future
Retail
    * Deal comes just as Amazon begins to pilot Fresh produce
delivery
    * Shares in Future Retail down 5% in early trading in Mumbai

 (Adds details on share price move, analyst comment, background)
    By Euan Rocha and Nivedita Bhattacharjee
    MUMBAI/BENGALURU, Aug 22 (Reuters) - Amazon.com Inc  AMZN.O 
is set to snag a 3.58% minority stake in India's Future Retail
 FRTL.NS , which operates more than 1,500 stores in India and
owns several supermarket brands, including budget department and
grocery store chain, Big Bazaar. 
    Future Retail said in a regulatory filing late on Thursday
that Amazon has agreed to acquire a 49% stake in Future Coupons
Ltd. That entity in turn owns a 7.3% interest in Future Retail,
according to prior filings. 
    The companies did not disclose the value of the deal, which
gives Amazon a stake in one of India's biggest retail chains,
whose stores sell everything from clothes to fresh produce.
    The transaction valued Future Retail at a "substantial
premium" to its existing market price, a source familiar with
the matter told Reuters. 
    The Economic Times reported https://economictimes.indiatimes.com/industry/services/retail/biyani-company-valued-at-rs-43000-crore-amazon-gets-coupons-to-invest-in-future-retail/articleshow/70796729.cms
 that the deal pegged the Mumbai-based company's value at about
430 billion rupees ($5.98 billion), more than double its current
market capitalisation of $2.91 billion.
    Amazon and Future Retail declined to comment on the value of
the transaction that remains subject to regulatory approval. 
    Future Retail's shares were down 5% at 393 rupees in morning
trade in Mumbai, as many investors had expected Amazon to
purchase a 10% stake based on previous media reports. The two
sides have reportedly been in talks for more than a year.
 urn:newsml:reuters.com:*:nL4N2592QL
    "The earlier expectation was Amazon would invest via a fresh
issue, but now the money's going to the promoter and the company
is not benefiting," said Deepak Jasani, senior vice president at
HDFC Securities. "People had bought on expectation, and now are
selling on the news." 
    The regulatory filing said the deal gives Amazon the right
of first refusal should Future Retail's founder, Kishore Biyani,
or his family decide to further trim the 47.02% stake they own
in the company, both directly and via entities like Future
Coupons that they control.
    The online retailer announced plans on Thursday to launch
its Amazon Fresh service to select areas in India's tech hub of
Bengaluru, the e-commerce company's first such foray into
delivering fresh produce in India, seen its last major growth
market. 
    In addition to over 290 Big Bazaar outlets, Future Retail
also operates a dozen up-market grocery stores under the banner,
Foodhall. Convenience store chain 7-Eleven Inc has also tied up
with Future Retail to operate its stores in the country.  
    The Future Retail transaction marks Amazon's second such
move to acquire a stake in an Indian supermarket store operator.
Last year, Amazon and Indian private equity firm Samara Capital
announced a joint investment in an entity that would give Amazon
a stake in Indian supermarket chain More. Amazon also owns a
stake in Indian department store chain Shopper's Stop  SHOP.NS .
 urn:newsml:reuters.com:*:nL3N1W64T7 
    Early this year, India revised its e-commerce rules,
creating hurdles for Amazon and rival Walmart Inc's  WMT.N 
e-commerce subsidiary, Flipkart. One revised rule bars an entity
in which a foreign e-commerce company or its group companies
have a stake from selling on their online platform.
    These and other restrictions forced Amazon to alter how it
structures some of its equity holdings in the country.
 urn:newsml:reuters.com:*:nL3N2020PA urn:newsml:reuters.com:*:nL3N1ZV2PJ
    India's revised e-commerce regulations, along with its push
to compel multinationals to store data locally, have irked the
U.S. government and heightened trade tensions. India has argued
the rules are aimed at protecting interests of its small traders
and privacy of its citizens.  urn:newsml:reuters.com:*:nL4N25G0AI
    Ahead of the launch on Wednesday of Amazon's biggest campus
in the world, in the southern Indian city of Hyderabad, Amazon's
India head, Amit Agarwal, said India should encourage e-commerce
and not try to "define every single guard rail under which it
should operate."  urn:newsml:reuters.com:*:nL4N25H34S
    ($1 = 71.8650 Indian rupees)

 (Reporting by Euan Rocha in MUMBAI and Nivedita Bhattacharjee
in BENGALURU; Editing by David Gregorio and Stephen Coates)
 ((euan.rocha@tr.com; +91 22 6180 7257; Reuters Messaging:
euan.rocha.reuters.com@reuters.net))
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