Mumbai: Departmental store chain Shoppers Stop’s shares rose as much as 20% to Rs499.70, their highest level since January 2015.
The shares rose 19.97% to close at Rs499.60, while the benchmark BSE Sensex closed lower by 295.81 points, or 0.93%, to 31,626.63.
The gains came after the company announced it was selling a 5% stake for Rs179.25 crore to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon Inc on Saturday. The company plans to seek shareholder approval for the deal in an extraordinary general meeting, although managing director Govind Shrikhande declined to share a timeline.
The company has also announced an exclusive tie up with Amazon India to set up a microsite on Amazon.in for Shoppers Stop brands.
“The development, along with the exclusive pact with Amazon is a major positive for the company," said Abneesh Roy, senior vice president at equities brokerage firm Edelweiss Securities in a message on Saturday, September 23. “The stock will do quite well. It’s been a huge underperformer last 2 years when other retail stocks are up 3-4x. “This stock could easily double in the next 1 year."
However, the success of this pact with Amazon remains to be seen, other analysts say.
“The deal is not that significant in terms of value," said an analyst tracking the company with a domestic equities brokerage firm, requesting anonymity. “Shoppers Stop says (the exclusive tie up) will help bring private label brands on Amazon, but what remains to be seen is how these brands will compete with the unorganized sector brands on Amazon, because people prefer to go for known brands. It may have to be on price," the analyst said.
Shoppers Stop is also expected to announce a deal to raise funds for grocery retail chain HyperCity. “A decision is expected in the next 4 weeks," Shrikhande said in an interview with Mint.