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Kumar Mangalam Birla’s dream of making it big in the retail segment has ended with Aditya Birla Group selling off its struggling supermarket chain — More — to US online retail giant Amazon and Indian private equity firm Samara Alternative Investment Fund.
While the deal size has not been disclosed, market experts are pegging it at about ₹4,500 crore, making it one of the biggest deals in the offline food and grocery segment.
Birla had launched the venture in 2007 with plans to set up a network of 1,000 stores. But just over a decade later, Aditya Birla’s retail ambition has been abandoned owing to competition from e-commerce players. According to company insiders, the lack of a long-term strategy also hindered growth for Aditya Birla Retail, which reported a loss of ₹644 crore in FY17.
With debt climbing to ₹ 6,573 crore for the retail venture, Aditya Group has been trying to sell More for the past few years.
Under the deal signed on Wednesday, Witzig Advisory Services Pvt Ltd, owned by Indian private equity firm Samara Alternative Investment Fund, is the lead buyer with 51 per cent stake; Amazon has acquired 49 per cent. Amazon has also acquired a substantial stake in More’s back-end company RKN Retail, according to sources. Amazon declined to comment.
More, formed in 2007 with the acquisition of South India’s retail chain Trinethra, is India’s fourth-largest food and grocery chain with over 500 stores. It competes with other affordable retail chain networks such as Reliance Retail, DMart and Future Group.
The deal frees the Aditya Birla Group to focus on other key businesses including cement, finance, telecom, and metals.
Group Chairman Kumar Mangalam Birla, in a mail to his top management, a copy of which BusinessLine has seen, said, “ ...ABRL needs a strong balance sheet and large investments. Keeping in mind the Group’s other allocations and priorities and ABRL’s need, I believe that at this stage, it serves the best interest of the business to opt for an external investor.” The existing management would continue to drive the business, he said.
Experts view this deal as a great exit for the Aditya Birla Group. It also signals a consolidation in the $400-billion food and grocery sector. Other players in the segment are Godrej Natures Basket, Star Bazaar and online players such as BigBasket and Grofers.
Arvind Singhal, founder of retail consultancy firm Technopak, said, “The deal frees up equity for Aditya Birla and also poses a threat to other small retailers, given Amazon’s interest in food and grocery.”
Amazon India has been ramping up its food and grocery business with Now and Pantry and might use More’s offline channel to retail its private labels and also use the network to serve as a pickup and delivery point for its customers, said Devangshu Dutta, founder of retail consulting firm Third EyeSight.
“This deal can’t be treated as a watershed moment in the retail segment at the moment but can lead to a consolidation in mid term given the number of regional and smaller players and entry of newer brands in the market,” Dutta said adding that More’s large customer base would help Amazon get insights into the purchase behaviour in the smaller towns, where More’s store are present.
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