Ambani’s Reliance offered Amazon $ 20 billion stake in retail arm

(Bloomberg) – Reliance Industries Ltd of Indian billionaire Mukesh Ambani is offering to sell Inc a stake of about $ 20 billion in its retail business, according to a person aware of the case.

Amazon has discussed investments in Reliance’s Retail Ventures Ltd unit and expressed interest in negotiating a possible transaction, the person said. Mumbai-based Reliance Industries is set to sell as a 40% stake in a subsidiary of Amazon, the person said, adding the information is private due to not being identified.

A deal, if successful, would not only produce a retail beef in India, but would associate Jeff Bezos and Asia’s richest man in one of the world’s fastest growing consumer markets. According to data compiled by Bloomberg, at $ 20 billion, the deal would be the biggest deal for India as well as Amazon.

Reliance Industries shares rose to a record high. The stock advanced 7.1% in Mumbai – the highest since April 22 – topping the company’s market valuation by $ 200 billion. It was the top gainer of the day on the benchmark S&P BSE Sensex, which rose 1.7% on Thursday.

In India, where a lot of people still shop in small street-corner stores, the deal could be Amazon’s way of accepting that it has to partner locally with a strong on-the-ground presence. the wanted. For Amazon, Reliance will provide a brick-and-mortar component to its ambitions in a country where online purchases still account for an estimated $ 1 trillion share of the retail market’s debt.

Highly complementary

“The deal will be a very complementary build on the strength of both sides,” said Utkarsh Sinha, managing director of Bexley Advisors in Mumbai. “Amazon comes with its storage capacity and ability to streamline the supply chain and sweat assets for maximum returns.”

Amazon has not made a final decision on the size of its potential investment, and talks could still fall, the person said. A representative from Amazon declined to comment.

“As a policy, we do not comment on media speculation and rumors,” a Reliance spokesperson said in an emailed response to Bloomberg News. “Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations. “

Any agreement between the two would also affect the partnership that was indirectly forged through Ambani’s group purchase last month, when it bought the assets of the indebted Future Group. Amazon invested in one of Future’s unlisted firms last year and later expanded the alliance.

India Playbook

Such investment by Amazon also means that Titan is making changes to its playbook after learning from past failures in the field. Earlier, the online juggling strategy of going solo in China flopped due to competition from domestic giants including Alibaba Group Holding Limited and Inc.

For Reliance, the deal would further testify Ambani’s ambitions to make India an e-commerce giant for the Alibaba Group. Reliance Retail had already lured about $ 1 billion from Silver Lake Partners, with the firm costing around $ 57 billion.

Bloomberg News reported on Wednesday that US private equity firm KKR & Co is in advanced negotiations to invest at least $ 1 billion, and El Catterton is also considering investing.

Investment in Ambani’s retail ventures comes when he launched his technology venture – Jio Platforms Ltd. – Sold $ 20 billion stake to investors including Facebook Inc. and Google.

Read more: Meet Man-Jio Deal sharing on Facebook for Ambani

The 63-year-old tycoon, who added $ 24 billion to his personal wealth this year, told shareholders in July that the retail entity would be queuing up for investors to get on board.

Reliance Retail – a unit of energy-to-telecommunications, runs Reliance Industries – a supermarket, India’s largest consumer electronics chain store, cash and carry wholesaler, fast-fashion outlet and an online grocery store called JioMart . It recorded income of 1.63 trillion rupees ($ 22 billion) in the year through March 2020. The unit operates around 12,000 stores in about 7,000 cities.

Pivot away

For Indian business Mogul – who has identified technology and retail as areas for future growth – the investments will help keep the group away from the energy business it inherited from its father, who died in 2002 .

While Ambani is keen to sell bets to attract foreign investors, he is actively acquiring local retail assets to strengthen his leadership position.

In addition to the purchase of Future Group, Reliance is in talks to acquire smaller firms such as a small firm, online furniture vendor and Zim, a lingerie manufacturer.

A stale for Amazon, however, may need to clarify antitrust constraints. The collaboration between the world’s largest online retailer and the country’s top offline retailer with a strong presence in India could pose a market concentration risk that could invite regulatory scrutiny.

Bexley’s Sinha also warned of “possible unintended consequences” if the transaction was successful. “It is incomprehensible that it benefits any other entity in the Indian retail space at large,” he said.

(Updated with Reliance’s sharing update in the fourth paragraph.)

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