Spencer's in talks with Amazon, other investors for minority stake sale

Spencer's is expected to be demerged from its mother company -- CESC Ltd -- shortly and this is when it will have to arrange for its own funds to keep its hold onto the retail space

RP-Sanjiv Goenka’s food and grocery retail chain, Spencer’s Retail, is in talks with multiple players, including Amazon, for offloading a minority stake. Sources said talks were at preliminary stage and discussions were being held with more than one entity. It was understood that Amazon was one of players that Spencer’s was in talks with.

Asked whether Amazon is looking at a minority stake in Spencer’s, Shashwat Goenka, sector head of Spencer’s Retail, said, “We keep exploring multiple things but I cannot comment on anything unless it materialises. We are open to opportunity and at any given time we are exploring two to three opportunities.” Amazon, however, declined to comment. 

As part of the demerger plan of its parent firm, CESC, Spencer’s is expected to be separated from the mother company and this is when it will have to arrange for its own funds to keep its hold in the retail space. In 2017-18, the company posted a pre-tax loss of Rs 0.30 billion as against the pre-tax loss of Rs 1.29 billion in 2016-17. Its revenue, however, had showed marginal improvement by 3.46 per cent at Rs 20.91 billion for the year ended March 31, backed by expansion. In this financial year, Spencer’s will register its first PBT (profit before tax).

With years of accumulated losses, Goenka, on the other hand, is not keen to opt for the private equity (PE) route. 

“We have been clear that no significant PE funding is what we will be looking at. But other things we will look into. We are open to all of it but PE is not my preference for Spencer’s,” he said.

Moreover, Spencer’s is on an expansion mode and plans to open 20 more stores this year, thereby, pulling up the total store count to 148. 

Goenka doesn’t want this expansion to be “reckless” and would come up with stores that would be profitable in the first few months of operation and be continuously profitable. However, Goenka is flexible with his profitability clause for the stores in case Spencer's is able to narrow down upon properties, which may have a long-term gain.

While discussions are on with potential investors, Goenka also batted for consolidation. “Whenever consolidation happens, it helps the industry grow. Now, a large level of consolidation is happening and by the end of it, three-four players hopefully should be left and that will be a combination of Indian and international players. I think that will be great because then each of us will stand for something to the consumer.” 

Amid this changing scenario, Spencer’s wants itself to be known as an “aspirational player” rather than a steep discounter. The only concern he has is over a level-playing field in the era of consolidation and wondered if it would be beneficial for the retail sector to have a unified and one policy both for e-commerce as well as bricks-and-mortar model.

According to Goenka, a lot more companies would be investing in India, like retailers from the US, Japan, and Australia. Also, investment would be made at the back-end, too. “We are not growing a business to sell out to some. We are in this for the long run,” he said.

To improve customer experience in its stores, Spencer's is piloting a cashless and interaction-free checkout, where the customer scans products on their phone and exits the store by paying on the app 

— a concept similar to Amazon Go.

“We are piloting it now. Now, we have implemented this only for a few of our employees. There are a few tech things we need to fix. If the pilot goes well, we’ll probably do a launch for a few select customers before it can be rolled out,” he said. 

Globally, the concept is at a nascent stage and there are just two such Amazon Go stores in the US. 

According to reports, a clutch of start-ups are experimenting with the idea in the US and Microsoft is believed to have shown a sample technology to Walmart. In India, Myntra has already done it. 

In May, Walmart announced acquisition of a 77 per cent stake in Flipkart for a whopping $16 billion. Amazon is said to be in talks with Future Retail apart from Spencer's Retail for a stake.