Amazon deal to help Shoppers Stop reduce debt

The investment by Amazon’s arm and a tie-up with its seller services firm would help Shoppers Stop to cut debt, fund expansion and boost sales.

On Saturday, Shoppers Stop had said it would raise Rs 180 crore by selling a 5 per cent stake to Amazon.com NV Investment Holdings.

Shopper Stop’s tie-up with Amazon Seller Services to list its entire portfolio of 400 brands via a flagship store on Amazon.in would help it “to leverage its catalogue on Amazon.in, attract large flow of customers to its site Shoppersstop.com, and leverage the marketing strengths of both the brands”, said Govind Shrikhande, managing director at Shoppers Stop.

Abneesh Roy, senior vice-president, institutional equities at Edelweiss Securities, said the tie-up would help Shoppers Stop reap benefits from its partner’s enviable digital presence. “The Shoppers Stop management expects Rs 200-crore sales from digital after the tie-up with Amazon, and 6-8 per cent Ebitda margin in FY19,” Roy said.

Roy expects Shoppers Stop to leverage Amazon India to increase its private label contribution from 16.4 per cent in Q1FY18. “Having Amazon India as an investor would also boost confidence of Shoppers Stop’s investors,” he said.

Shrikhande said they would continue to focus on the growth of brick-and-mortar and online stores to drive an omni-channel experience for its customers. “So, the investment will be used to fund capital expenditure, working capital requirements and general corporate purposes to augment our business,” he said.

Shoppers Stop runs 80 stores and plans to add 20 in the next four years.

“As per reports, Future Retail is looking to acquire HyperCity at Rs 1,000 crore enterprise value, which will be a positive for Shoppers Stop. Consequently, we expect Shoppers Stop to sharpen focus on its departmental business and also utilise the sale proceeds to pare debt,” Roy said. Shoppers Stop’s debt stood at Rs 492 crore in the first quarter of FY18. 

“Amazon India and Shoppers Stop tie up and the exit of Aditya Birla Group from its online platform shows huge relevance of physical retailing in India,” Roy said.