Amazon boxes are seen stacked for delivery.Reuters

K Raheja Corp Group owned departmental store chain Shoppers Stop approved the sale of 5 percent of the company's stake to the investment arm of Amazon for Rs 179.25 crore.

The deal indicates that the world's largest online retailer Amazon smelt opportunity in using physical stores as one of its sales drivers in India.

In a board meeting held on Saturday, Amazon agreed upon the deal in which the company would buy 43.9 lakh Shoppers Stop shares at 3 percent discount on Friday's closing price on NSE at Rs 407.78 apiece. The firm's shares closed at Rs 420 during Friday's trade.

The proceeds of the deal will be used to expand Shoppers Stop's physical footprint, said Govind Shrikhande, the company's managing director.

"I think we are on the path of continuous growth and we believe that Indian retail – the physical side as well – is still under-penetrated. So, I think this will help us to invest further. We are going to open about five stores in the second half of this year and there is a plan of another fifteen stores for the next four-year period," BloomberQuint quoted Govind Shrikande, Managing Director Shoppers Stop as saying.

Promoter K Raheja Corp Group holds 67.10 percent stake in Shoppers Stop, according to data on the Bombay Stock Exchange.

Following the decision, the company will now hold an extraordinary general meeting (EGM) of its shareholders to seek their approval for this deal.

Shoppers Stop had last week entered into a commercial arrangement with Amazon India to sell all its private labels and brands on the latter's marketplace.

Also, their chain will have a flagship store on to list its entire portfolio which will leverage Shoppers Stop's brand assortment and's reach for an omni-channel presence, reported the Economic Times.

"These will be for customers to touch and feel Amazon's exclusive brands, mainly for fashion and accessories. We will have the same discounts on Amazon as we carry in our stores," Shrikhande said to Mint.

Amazon had earlier announced that it would likely set up more warehouses in India to sell bulkier appliances in a bid to meet surging demands across the country.

"In the facilities that we have created, we have run out of space in hardly 12 months of full operations," said Manish Tiwari, vice-president of Category Management at Amazon India.