September 11, 2020 4:19:44 am
Amazon has had “discussions” and “expressed interest in negotiating a possible transaction, said a person with knowledge of the matter,” reported Bloomberg.
After completing a fundraiser of over $ 20 billion for Jio Platforms, Reliance Industries Ltd is said to be in talks to raise as much money by transferring a 40 percent stake into its arm, Reliance Retail Ventures Ltd, to Amazon Inc, the Internet’s largest company, Bloomberg News reported Thursday.
This comes less than a month after Reliance Retail, India’s largest retailer, strengthened its position in the sector by acquiring assets from second-place rival Future Group.
Amazon has had “discussions” and “expressed interest in negotiating a potential transaction, said a person with knowledge of the matter,” reported Bloomberg. However, “Amazon has not made a final decision on the size of its potential investment and the talks could still flounder,” the person said.
Still, the report led to a strong rally in Reliance Industries stock that soared 7.14 percent to Rs 2,314.65 on the BSE on Thursday. Following this increase, RIL’s market capitalization exceeded the Rs 15 lakh crore ($ 200 billion) mark, making it the first Indian company to enter this group. The closest is TCS, with a market cap of Rs 8.74 lakh crore.
RIL’s stock rally led to a 646-point gain on the Sensex to 38,840.32 while Nifty gained 171 points to 11,449.25. Analysts say that nearly half of the profit on the Nifty Index was contributed by RIL.
According to the Bloomberg report, the 40% stake in Reliance Retail has been offered to Amazon for a $ 20 billion investment in the company. India’s foreign direct investment rules allow foreign players to own a maximum of 51% in multi-brand retail business enterprises with government approval, subject to certain conditions, such as a minimum investment in back-end infrastructure. This includes the investment made for processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, warehousing, warehouse, agricultural market product infrastructure, etc.
Reliance Industries has already raised Rs 7.5 billion by selling a 1.75% stake in Reliance Retail to US private equity firm Silver Lake. This deal valued Reliance Retail at Rs 4.21 lakh crore.
In response to a query from The Indian Express, Reliance Industries said: “In light of a high incidence of speculative media inquiries and incorrect and ex parte media articles relating to alleged equity transactions in Reliance Industries or the companies of our group, we would like to reiterate that as a policy, we do not comment on speculation and rumors from the media and we cannot confirm or deny any transaction that may or may not be in process.
“Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make the necessary disclosures in accordance with our obligations under the Securities Exchange Board of India’s 2015 Regulations (Obligation Listing and Disclosure Requirements) and our agreements with stock exchanges, ”he added.
Responding to an email inquiry, Amazon said: “… we do not comment on speculation about what we can or cannot do in the future.”
Amazon and Reliance Industries already have several competing interests in various digital segments, including supermarkets, pharmacies, fashion, electronics, etc.
In addition, Amazon has also backed the supermarket chain More, which it bought with the private equity fund Samara Capital from Aditya Birla Group. More competes with Reliance Retail’s Reliance Fresh supermarket chain.
However, with the acquisition of Future Group assets by Reliance, both companies came to the same table given the purchase of Amazon’s 49% stake, for an estimated Rs 1,500-Rs 2,000 crore, in Future Coupons, the promoter of Future Retail in August 2019.
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