Ambani’s Reliance Industries Ltd is said to be offering to sell an approximately $ 20 billion stake in its retail business to Amazon.com Inc, Bloomberg News reported this week. If Ambani succeeds in striking such a deal, it would mark another victory for the billionaire, who in recent months has secured a $ 20 billion investment in his digital unit from big names like Facebook Inc and Google Inc.
The mere possibility of an investment in Amazon reveals not only Ambani’s market influence, but also how India’s business climate is changing as Prime Minister Narendra Modi intensifies nationalist rhetoric as the nation hurtles toward the first economic downturn. annually in 40 years. Having seen multiple regulatory hurdles thrown their way, an alliance with a powerful Indian ally has never seemed more crucial for the world’s largest internet companies. And no business person carries more weight in India than Ambani.
Better cooperate
“I suspect that the government is somewhere signaling that multinational companies are better off coming with some Indian partner,” said Arun Kumar, economist and president Malcolm Adiseshiah at the Institute of Social Sciences. “Then Amazon might decide that it is better to cooperate with Reliance than to compete against it.”
The 63-year-old mogul has identified technology and retail as areas for future growth moving away from the energy businesses he inherited from his father, who died in 2002. Retail is the next frontier for Ambani, whose ambitions include starting a business. local. E-commerce giant like Alibaba Group Holding Ltd. of China
Silicon Valley’s ambitions at home pose a threat to Ambani’s ability to achieve such dominance in its local market, but gaining their cooperation, with all the knowledge and global reach it brings, could help it achieve it faster. That aligns with the emphasis Modi has been putting on developing the local economy.
‘The mantra of life’
In a 33-minute speech to the nation recently, Prime Minister Modi used the word “self-reliance” 17 times. “The crisis in the crown has taught us the value of local manufacturing, local markets and local supply chains,” Modi added. “The local is not only our need, it is also our responsibility. Time has taught us that we will simply have to make the mantra of our life ‘local’. ”
Still, India is increasingly important to Silicon Valley because it is a market of over a billion people that is still largely untapped. China is dominated by local e-commerce companies and largely excludes global tech companies, while established markets in the West offer limited growth opportunities.
Although Amazon is already India’s largest e-commerce player, its ability to compete with domestic companies was hampered by an abrupt rule change in 2018 that limited foreign players to operating as e-Bay-style marketplaces, instead of selling your own shares.
Enter e-commerce
Not long after, Ambani announced that his own growing conglomerate, Reliance Industries, would make an entry into e-commerce, leveraging its control of both India’s largest mobile operator and the largest network of physical stores.
In response, Amazon sought to bolster its presence on the ground with an investment in India’s second-largest physical retailer, Future Group, with liquidity problems. But the rules restricting foreign ownership in that sector meant its investment was too small to stem Future Group’s slide into financial distress.
Last month, it was Ambani who was hoping to take over the majority of the company’s operations for $ 3.4 billion. In the face of a regulatory downside and a competitor that only seems to get stronger, it’s not hard to see why Amazon might be tempted to make a peace offer now.
“Reliance has physical, logistics, warehousing and now operations in line with their recent deals,” said Chakri Lokapriya, investment director at TCG Asset Management in Mumbai. “It will take years of operational infrastructure for Amazon or other multinational companies to recreate that and therefore Reliance Industries is the preferred partner choice for their entry into India.”
Regulatory limbo
Facebook could have made a similar calculation. Its plans to turn its popular WhatsApp messaging platform into a nationwide payment system have been stuck in India’s regulatory limbo for more than two years.
Meanwhile, Reliance is moving forward with its own payment system, with nearly 400 million mobile subscribers as its built-in user base. But since their deal, Facebook and Reliance have announced that WhatsApp will be at least the primary platform for Ambani’s online grocery store, its flagship e-commerce offering, ensuring the social media giant has a foothold. in the Indian e-commerce market you greed.
Meanwhile, Google has announced plans to launch a low-cost phone with Ambani that will run on its Android operating system. Previously, Ambani had been selling its own low-cost phones, which ran on a different operating system. Google, like Facebook, may have decided that it was better to work with Ambani than against him. Amazon may end up doing the same.
“Business in India is taking a monopolistic approach,” said Mathew Antony, managing partner at Aditya Consulting, a boutique legal advisory firm in Mumbai. “It is increasingly evident with Facebook and similar investment agreements that large investments by foreign companies in the country have by default a first right of refusal at the doors of Reliance.”
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