More buyer Witzig confirms Amazon backing


September 24, 2018

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KOLKATA: Witzig Advisory Services, that acquired More supermarkets from Aditya Birla Retail, has officially confirmed that Amazon has invested in the facility support backend company, adding that the deal is compliant with India’s retail FDI norms. Amazon too confirmed its investment in Witzig.

“Samara Capital and Amazon have agreed to co-invest in a facilities support and management and value added services company called Witzig Advisory Services Pvt Ltd. We confirm Witzig has agreed to acquire the grocery retail chain More,” said Paurush Roy, director, Witzig, in an emailed response. “We will ensure Witzig complies with all applicable laws and regulations.” Roy is also managing director at Samara Capital.

A spokesperson said Amazon will enhance its services portfolio, and meaningfully invest in and create opportunities for skill development and job creation through this investment in Witzig. “Both Samara and Amazon see significant growth potential in facilities support and management and valued added services in the coming years,” the spokesperson said. However, analysts say a deal of this size in a market like India will be subject to scrutiny, more so when there is so much opposition to multi-brand retail FDI.

Devangshu Dutta, chief executive at retail consultancy firm Third Eyesight, said the deal is likely to be scrutinized on two fronts — impact on online and offline retail competition diversity, and from the foreign investment regulations standpoint. “Structure of the deal could be open to interpretation on the compliance side, though legal brains would have surely ticked all boxes before signing, as in the Walmart-Flipkart deal, to ensure it’s compliant,” he said.

An industry executive said since Witzig is majority 51% owned by an Indian entity which is Samara Alternative Investment Fund (AIF) and Amazon will hold minority 49%, Witzig will be considered as an Indian entity as per FDI laws. Samara AIF will be considered as a domestic vehicle since it is sponsored and managed by Indians whereby the percentage of foreign corpus in it won’t make a difference as per regulations. “As a result, a downstream investment by Witzig, including the acquisition of More, will be FDI compliant,” the executive said. Another person, asking not be named, said Amazon participated in the deal through its investment arm, Amazon Overseas Holdings Inc, and not the flagship e-commerce entity Inc to avoid regulatory roadblocks in approval. He said Amazon will also keep distance from the board, management team and will not be involved with operations at More.

Roy said Witzig will focus on skill development, vocational training and contribute towards employment generation with respect to facilities support, management and other value added services such as installation, housekeeping, engineering support, electrical technicians, service staff, plumbing technicians for business customers. The two persons said the application for regulatory approval to Competition Commission of India will clearly mention the core areas of operation of Witzig, how Amazon is just a minority investor in it and it is majority owned by a domestic entity, and that Amazon will not be involved in running More.

Dutta, however, says even if Amazon doesn’t take active operational interest or a board position in More right now, it is definitely a long term deal for them, and they may do both when regulatory conditions are conducive. For the moment, Amazon Seller Services, which owns and operates the Indian online marketplace, and More will strengthen their ‘seller’ business relationship since More is already a seller for over a year in its hyperlocal food and grocery platform, Amazon Prime Now, the two executives said.

Amazon will expand Amazon Prime Now keeping in mind More’s store network apart from other factors and there will be omni-channel capabilities for both Amazon and More, the executive said. More will roll out a ‘click and collect’ service whereby consumers can order from and get the package collected from the More store, one executive said. “The offline expansion of More store network will also keep in mind Amazon’s ambition, but that won’t be the only deciding factor since the business will be run independently,” he said.

Another executive said since Amazon’s FDI approval is only in food retailing, it is difficult to make food retailing successful exwithout a strong presence in grocery since shoppers buy both together. “Herein More will play a role,” he said. Samara-Amazon is retaining the entire management team of More — chief executive officer Mohit Kampani, chief operating officer Sashi Gumma, chief merchandising officer Sumit Chandna, chief financial officer Girdhar Chitlangia and chief marketing officer Apeksha Gupta. ABRL’s managing director Pranab Barua will join as a director on board of Witzig.

Source: economictimes