Morning after Walmart announced its takeover of Flipkart, Future Group, the country’s biggest brick-and-mortar retailer, is looking to close a deal of its own — sell at least 10% stake to a global retailer.
“I will sell a minority stake to the strongest global retailer,” Future Group founder Kishore Biyani told a business newspaper on 9th of May without divulging any names. But sources said Biyani has held early talks with Walmart and Amazon, the two American retail giants which will now be direct rivals in India.
India doesn’t allow overseas investment in multi-brand retail. But there are ways to get FDI. Amazon, for example, invested in a retail company through its investment arm, the route through which it picked up a 5% stake in Shoppers Stop, analysts said.
Amazon’s investment arm is registered as a foreign portfolio investor that can buy up to 10% in an Indian entity as a single firm.
“Our strategy had taken into account that something like this (the Walmart-Flipkart deal) could happen,” Biyani said. “We have to consider our position more carefully…we have a lead in this country…our use of technology has increased significantly,” the Future Group boss said, explaining how he’s looking to shore up his company’s strength as India played host to the world’s biggest ecommerce deal.
“We are reasonably strong in all categories we are in — food, fashion and home. There are going to be alliances which will be formed and we believe that our alliance will be the strongest one,” said Biyani without elaborating on its potential partner. Biyani said his first aim is to retain market share in the organised food and grocery market. His take is that Walmart buying Flipkart can change the game in consumer durables and IT products. More than 98% of retail sales in India happen in brick-and-mortar stores. Biyani told the paper that he expects the Walmart-Flipkart deal to follow the lines of online to offline or O2O model.
“Maybe they (Walmart) will merge its cash and carry business into this (Flipkart). They have to get into grocery business and they will create a franchise retail model or will enter retail in some manner,” added Biyani.
Walmart’s rival Amazon has won government approval to enter the food business in India and has also acquired a small stake in offline retail chain Shoppers Stop.
Over the past few months, Biyani has met the brass of both Amazon and Walmart, looking for a strategic partnership. Future Group officials have held a series of meetings both in India as well as Amazon’s Seattle headquarters to discuss an alliance.