Mukesh Ambani (AFP)
MUMBAI / NEW DELHI: Reliance Industries Ltd (RIL), controlled by Mukesh Ambani, has offered a significant stake in its local retail unit to Directed by Jeff Bezos Amazon.com, a deal, if it goes through, would make the two billionaires and business rivals strategic partners in one of the world’s largest consumer markets, Bloomberg News reported Thursday.
The deal would also trigger a three-way battle between Amazon-Reliance, Walmart-Flipkart, and other players in the world’s second-most populous country, where the Covid-19 pandemic has accelerated a shift in consumer behavior from the retail trade of brick and mortar towards e. -Commerce.
Reliance and Amazon have been in talks for a possible transaction, with the former offering to sell up to a 40% stake in its retail unit, according to the Bloomberg News report. The deal could involve Amazon investing $ 20 billion in Reliance Retail Ventures (RRVL), the controlling company of RIL’s retail business, and if a transaction goes through, it will be the largest incoming M&A in India, according to the report.
RIL declined to comment on the report when contacted by TOI. “We cannot confirm or deny any transaction that may or may not be in process,” RIL said, adding: “It evaluates various opportunities on an ongoing basis.”
The report said that any transaction between the two players would also boost their alliance that was indirectly forged last month through an unrelated purchase by RIL when it bought Future Retail assets. Amazon had invested in Future Retail in 2019 and then expanded the partnership.
In addition to Amazon, global private equity funds are also exploring an investment in RRVL. The rules allow foreign investors, including strategic players, to own up to 49% of an Indian-owned and controlled company.
Reports of potential deals at the retail unit boosted RIL’s shares on Dalal Street, with the company registering a market capitalization of $ 208 billion on Thursday. With this valuation, RIL became the first Indian company to cross the $ 200 billion mark and the 40th most valued company in the world.
Ambani had previously said that it had received strong interest from strategic and financial investors in the retail business and that it would be finalizing deals and partnerships in the coming quarters. He also said that RIL will hold an initial public offering of the consumer business in the future.
Reports say the billionaire offered small stakes in the retail business to existing financial investors in his telecommunications and digital services company Jio Platforms. While the Silicon Valley Silver Lake fund was the first to join, other investors from the US and the Middle East, including KKR, L Catterton, the Abu Dhabi Investment Authority, the Saudi Arabia Public Investment Fund and Mubadala They are in talks to acquire a share of RRVL, which is valued at $ 57 billion.
Founder of retail consulting firm Technopak Arvind singhal He said: “The deal makes sense for Amazon only if it wants to get out of India and become a portfolio investor. With the policy twists and turns in favor of national retailers, it won’t surprise me that they want to do it, “adding that” for Reliance, however, it makes perfect sense. Despite being the leading brick and mortar retailer in India, it has struggled to enter the e-commerce market, which is a tough business. And Amazon is the best at it. ”
If the deal comes to fruition, this will bring together the largest online and offline retailers in India. The combined entity can leverage Reliance Retail’s deep offline retail network and Amazon’s established logistics network to leverage omnichannel and cross-selling opportunities, leading to faster growth in e-commerce penetration in India, he said. Credit Suisse in a report.
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