Amazon’s bid to acquire supermarket chain More via JV hits regulatory hurdle

The country’s anti-monopoly watchdog has sought clarity on e-commerce giant Amazon’s role in the proposed acquisition of the Aditya Birla Group’s food retail chain More, according to a report in The Economic Times.

Citing people it did not name, the daily reported that the Competition Commission of India (CCI) has requested this information from Witzig Advisory Services, a joint venture controlled by mid-market private equity firm Samara Capital in which Amazon is seeking to purchase a significant minority stake. 

The CCI is said to have posed some specific questions about the deal such as whether it is in compliance with the recently revised regulations for foreign direct investment (FDI) in e-commerce. 

The watchdog has also raised concerns over Amazon’s possible day-to-day involvement in More’s functioning besides integration with its grocery operations.

The new norms state that an entity in which an e-commerce venture has a stake cannot sell goods on the platform with effect from February 1 2019. Furthermore, e-commerce ventures are not permitted to control inventory on their platforms.

This would affect Amazon’s potential plans to integrate More with its online operations and expand its Indian grocery retail business for which it had earmarked $500 million last year. 

Amazon's grocery app, Prime Now, already has a tie-up with More stores for procurement. After getting permission to start a food-only retailing business in India, Amazon had started its own inventory centre as well and renamed and relaunched the Amazon Now app to Prime Now.

Email queries sent to Amazon and Samara Capital seeking further details did not elicit a response till the time of publishing this report.

RKN Retail Pvt. Ltd and Kanishtha Finance & Investment Pvt. Ltd, the holding companies of Aditya Birla Retail Ltd which operates More, had in September announced that it had inked a pact to sell almost 100% of the privately-held retail chain to an entity controlled by Samara.

The deal was struck at an estimated enterprise valuation of Rs 4,200 crore ($580 million then).

A month later, Witzig Advisory Services had sought approval from the CCI for the acquisition of More while US-headquartered Amazon simultaneously sought the green light to pick up 49% stake in the joint venture.

Industry experts told TechCircle that the CCI’s decision to grant approval will boil down to how the joint venture is structured.

Amazon intends to buy the stake in Witzig through an investment arm, Amazon.com NV Investment Holdings LLC, as opposed to direct participation by its e-commerce unit. The same unit had purchased a 5% stake in Indian brick-and-mortar chain Shoppers Stop Ltd in 2017 and experts say Amazon may cite this as a precedent.

ABRL, part of diversified conglomerate Aditya Birla Group, runs 523 supermarkets and 20 hypermarkets under the More brand, its website shows. It is the fourth-largest supermarket chain in the country after Reliance Retail Ltd, Future Group and D-Mart.