Amazon investment boosts India’s Shoppers Stop stock

Bloomberg

Shoppers Stop Ltd.’s shares surged as much as 20 percent after forging a deal with Amazon.com Inc. that will help the Indian retailer boost revenue and add 25 percent more stores.
Shoppers Stop will raise $28 million selling a 5 percent stake to Amazon.Com NV Investment Holdings LLC, the Mumbai-based company said. It also agreed with Amazon’s local unit to set up experience centres—which let customers test out the products available online—across Shoppers Stop’s network of 80 bricks-and-mortar stores in India. The company will add 20 stores in the next four years, Govind Shrikhande, managing director of Shoppers Stop said.
The alliance will help Shoppers Stop tap part of the 400 million monthly visitors to Amazon’s online stores, Shrikhande said. Chief Executive Officer Jeff Bezos, who has allocated $5 billion towards Amazon’s expansion in India, will gain greater access to smaller towns across India as the e-commerce giant seeks to secure an advantage over local rivals.
“The partnership with Amazon will really accelerate our revenue from online sales and we expect it to double every year for the next three years,” Shrikhande, said. “Amazon will give us space in its fashion segment online where its users will have access to 400 brands from our catalog.”
Shoppers Stop, which has stores in smaller cities including Durgapur, Aurangabad and Kolhapur, is targeting 10 percent of revenue from online sales by 2020 from 1.2 percent, Shrikhande said. The company’s board approved the issuance of 4.4 million shares to a unit of Amazon for $6.28 a piece. Shares of Shoppers Stop surged as much as 20 percent, headed for the biggest increase since April 2009. They traded at 478.15 rupees, up 14 percent, as of 10:48 am in Mumbai. They have climbed 66 percent this year, compared with the 19 percent jump in the benchmark S&P BSE Sensex.
Both the companies will gain from the deal, said Harminder Sahni, founder
and managing director of consulting firm Wazir Advisors.