Samara, Amazon-backed More Retail stake sale gets lukewarm response

The joint venture was looking to raise funds at $2 bn valuation

Samara Capital’s plans to sell part of its stake in More Retail, a joint venture with American retail major Amazon, has received lukewarm response from potential investors. This is owing to valuation mismatch and losses of the grocery retail company.

Bankers said Samara was looking to sell 20 per cent stake in the joint venture at a total valuation of $2 billion but the response from potential investors was inadequate.

While Samara owns 51 per cent stake in the company, the rest is with Amazon. More Retail was also planning to launch an initial public offering (IPO) after the promoters planned to sell part of their stake.

An email sent to Samara Capital on Monday did not elicit any response till going to press.

According to two sources, Samara Capital was looking for an exit for around a year and has also shut many unprofitable stores in the last one year.

Another source said that the promoters are not keen to invest further and added that even an IPO was considered as an exit but More Retail saw no progress on this front.

According to the company’s filings, the grocery and food retail chain made a loss of Rs 550 crore on net sales of Rs 4,507 crore in the financial year 2022-23 (see chart).

More currently runs two formats, More Hypermarket and More Supermarket. According to More Retail's website, it has 41 hypermarkets and 872 supermarkets across the country. 

In 2019, Samara Capital had acquired the hypermarket and supermarket retail chain reportedly for Rs 4,500 crore from the Aditya Birla Group. The acquisition was made through Witzig Advisory Services in which Amazon holds 49 per cent.

With Samara at the helm, More Retail increased its stores and had a strong presence in the southern region with almost 70 per cent of stores located in the region. This was followed by a moderate presence in the North, East, and rest of India. 

The merchandise mix predominantly constitutes food and groceries, which are characterised by low-gross margins.

However, this was offset in the past by higher asset turnover compared to lifestyle categories.

More Retail enjoys a healthy share of private labels at over 25 per cent, according to Indian Ratings.

In FY23, both Amazon and Samara Capital invested an additional Rs 300 crore in the company. The retail chain, founded by the Aditya Birla Group, was sold as the Birla group was focusing on fashion retail.