AMZN Amazon.com Inc

By Corinne Abrams 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 21, 2018).

MUMBAI -- Amazon.com Inc. has upped the ante in its battle with Walmart Inc. in India, by teaming up with a local private-equity firm that is acquiring one of the largest retail chains in the South Asian nation for more than $500 million.

The deal could give Amazon a claim to the more than 500 stores of Aditya Birla Retail, which runs the More chain of supermarkets and hypermarkets. It comes just months after Walmart paid $16 billion for a 77% stake in Flipkart, one of India's top e-commerce sites.

Amazon said it had joined with India-based Samara Capital to invest in Witzig Advisory Services Pvt., a company that focuses on training and providing facilities staff.

Witzig, which is controlled by Samara, has bought a 99.99% stake in Aditya Birla Retail, according to an announcement at the Mumbai stock exchange Wednesday. The deal had an enterprise value of about 42 billion rupees ($583 million), a person familiar with the matter said.

"Both Samara and Amazon see significant growth potential in the area of facilities support and management and valued-added services in the coming years," an Amazon spokeswoman said in a statement.

The Amazon spokeswoman declined to comment on the financial terms of the deal or how the company would work with More supermarkets.

Local regulations would restrict Amazon from owning 51% or more of a local retailer.

The deal could give Amazon an important foothold in one of the world's last great untapped retail markets. Access to More's customers, data and outlets could help it better understand and deliver to India's population of around 1.3 billion people.

The Indian e-commerce market is set to exceed $100 billion by 2022, according to a report from PwC India and the National Association of Software & Services Companies. In the groceries market, e-commerce companies face competition from other big Indian supermarket chains as well as millions of mom-and-pop stores that most Indians use for their everyday needs.

Aditya Birla Retail's revenue was 41.94 billion rupees for the year ended March 31, 2017, up from 35.09 billion rupees a year earlier, the latest balance sheets filed with the country's Ministry of Corporate Affairs show. The company lost 990 million rupees in that period, compared with a loss of 1.68 billion rupees a year earlier.

Samara executives declined or didn't respond to requests for comment.

Amazon founder Jeff Bezos has pledged to invest $5 billion in India, and the company looks set to go head-to head with Walmart both online and off.

The investment in the firm that bought Aditya Birla Retail could provide Amazon with much-needed physical space and access to an established supply chain. It also complements the 5% stake the Seattle-based company took in Indian department-store chain Shoppers Stop Ltd.

"Amazon is going to be open on all the retail opportunities in India," said Abneesh Roy, an analyst at Mumbai-based Edelweiss Securities. "This is part of the omnichannel strategy of Amazon."

Despite the country's large population and growing middle class, India has long been known as a tough place to make money for global retailers. Government restrictions, overburdened infrastructure and surprisingly expensive retail rents make it difficult for even the retail giants here.

The companies investing in India -- IKEA just opened its first outlet in India last month, for example -- see it as a long-term bet on the eventual emergence of a new consumer class and room to grow in mobile adoption and online retail.

--Debiprasad Nayak and Rajesh Roy contributed to this article.

Write to Corinne Abrams at corinne.abrams@wsj.com

(END) Dow Jones Newswires

September 21, 2018 02:47 ET (06:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.