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MUMBAI/NEW DELHI: Mukesh Ambani-controlled Reliance Industries Ltd (RIL) has offered a significant stake in its local retail unit to Jeff Bezos-led Amazon.com, a deal, if it is finalised,, would turn the two billionaires and business rivals into strategic partners in one of the world’s largest consumer markets, Bloomberg News reported on 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 behaviour from brick-and-mortar retail to e-commerce.
Reliance and Amazon have held discussions for a potential transaction, with the former having offered to sell as much as 40% stake in its retail unit, the Bloomberg News report said. The deal could entail Amazon investing $20 billion in Reliance Retail Ventures (RRVL), the holding company of RIL’s retail business, and if transacted, will be the biggest inbound M&A in India, the report said.
RIL declined to comment on the report when contacted by TOI. “We cannot confirm or deny any transaction which may or may not be in the works,” said RIL, 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 assets of Future Retail. Amazon had invested in Future Retail in 2019 and later expanded the partnership.
Besides Amazon, global private equity funds are also exploring an investment in RRVL. Rules allow foreign investors, including strategic players, to hold up to 49% in an Indian owned and controlled company.
Reports about potential deals in the retail unit boosted RIL’s shares on Dalal Street, with the company recording a market capitalisation of $208 billion on Thursday. At this valuation, RIL became the first Indian company to cross the $200 billion mark and the 40th most valued outfit in the world.
Ambani had said earlier that he had received strong interest from strategic and financial investors in the retail business and would be finalising deals and partnerships in the coming quarters. He had also said that RIL will hold an IPO of the consumer business in the future.
Reports said that the billionaire offered small stakes in the retail business to existing financial investors of his telecom and digital services venture Jio Platforms. While Silicon Valley fund Silver Lake was the first to come on board, other US and Middle Eastern investors, including KKR, L Catterton, Abu Dhabi Investment Authority, Saudi Arabia Public Investment Fund and, Mubadala are in discussions to acquire a piece of RRVL, which is valued at $57 billion.
Retail consulting firm Technopak founder Arvind Singhal said, “The deal makes sense for Amazon only if it wants to exit India and become a portfolio investor. Given the flip-flops in policies in favor of domestic retailers, I will not be surprised if they want to do so,” adding that “for Reliance, however, it makes a lot of sense. Despite being the leading brick-and-mortar retailer in India, it has found it difficult to crack the e-commerce market, which is a tough business. And Amazon, is the best at it.”
If the deal fructifies, then this will bring together the largest offline and online retailers in India. The combined entity can leverage the deep offline retail network of Reliance Retail and established logistics network of Amazon to harness cross-selling and omni-channel opportunities, leading to a faster growth in e-commerce penetration in India, Credit Suisse said in a report.
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 behaviour from brick-and-mortar retail to e-commerce.
Reliance and Amazon have held discussions for a potential transaction, with the former having offered to sell as much as 40% stake in its retail unit, the Bloomberg News report said. The deal could entail Amazon investing $20 billion in Reliance Retail Ventures (RRVL), the holding company of RIL’s retail business, and if transacted, will be the biggest inbound M&A in India, the report said.
RIL declined to comment on the report when contacted by TOI. “We cannot confirm or deny any transaction which may or may not be in the works,” said RIL, 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 assets of Future Retail. Amazon had invested in Future Retail in 2019 and later expanded the partnership.
Besides Amazon, global private equity funds are also exploring an investment in RRVL. Rules allow foreign investors, including strategic players, to hold up to 49% in an Indian owned and controlled company.
Reports about potential deals in the retail unit boosted RIL’s shares on Dalal Street, with the company recording a market capitalisation of $208 billion on Thursday. At this valuation, RIL became the first Indian company to cross the $200 billion mark and the 40th most valued outfit in the world.
Ambani had said earlier that he had received strong interest from strategic and financial investors in the retail business and would be finalising deals and partnerships in the coming quarters. He had also said that RIL will hold an IPO of the consumer business in the future.
Reports said that the billionaire offered small stakes in the retail business to existing financial investors of his telecom and digital services venture Jio Platforms. While Silicon Valley fund Silver Lake was the first to come on board, other US and Middle Eastern investors, including KKR, L Catterton, Abu Dhabi Investment Authority, Saudi Arabia Public Investment Fund and, Mubadala are in discussions to acquire a piece of RRVL, which is valued at $57 billion.
Retail consulting firm Technopak founder Arvind Singhal said, “The deal makes sense for Amazon only if it wants to exit India and become a portfolio investor. Given the flip-flops in policies in favor of domestic retailers, I will not be surprised if they want to do so,” adding that “for Reliance, however, it makes a lot of sense. Despite being the leading brick-and-mortar retailer in India, it has found it difficult to crack the e-commerce market, which is a tough business. And Amazon, is the best at it.”
If the deal fructifies, then this will bring together the largest offline and online retailers in India. The combined entity can leverage the deep offline retail network of Reliance Retail and established logistics network of Amazon to harness cross-selling and omni-channel opportunities, leading to a faster growth in e-commerce penetration in India, Credit Suisse said in a report.
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