(Bloomberg) – The world’s largest tech companies are taking a major chunk of India’s fast-growing internet space, but that means Mukesh Ambani, the country’s richest man.
Ambani’s Reliance Industries Ltd is said to have about $ 20 billion stake in its retail business, Amazon.com Inc. Is offered to sell. If Ambani succeeds in making such a bargain, it would be another win for the billionaire, who in recent months has garnered $ 20 billion in investment in his digital entity from marquee names including Facebook Inc. and Google Inc. The investment is not only closing the Ambani market, but also how India’s business environment is changing the nationalist rhetoric of Prime Minister Narendra Modi, while the country is moving towards the first annual economic contraction in 40 years. Has seen many regulatory hurdles in its path, a tie-up with a powerful Indian ally has never seen more significance for the world’s largest Internet companies. And no businessman in India – for his complex bureaucracy and red tape – steals more than Ambani.
To cooperate better
“I suspect that the government is hinting somewhere that it is better for multinationals to come with some Indian partner,” Arun Kumar, an economist and Malcolm Adhesia Chair at the Institute of Social Sciences. “Therefore Amazon may decide that it is better to cooperate with Reliance than to compete with it.”
Ambani offered Amazon a $ 20 billion retail arm stake
The 63-year-old Indian tycoon has identified technology and retail as future growth areas away from the energy businesses he inherited from his father, who died in 2002. Retail is the next frontier for Ambani, whose ambitions include building a home e-commerce giant like China’s Alibaba Group Holding Ltd.
Silicon Valley’s ambitions in the country are a threat to Ambani’s ability to achieve such dominance in his home market, but along with winning his cooperation, it is known that it is rapidly gaining global and global reach Can help to do. Modi has emphasized on developing India’s local economy.
In a 33-minute address to the nation recently, Modi used the word ‘self-reliance’ 17 times. “The Corona crisis has taught us the value of local manufacturing, local markets and local supply chains,” Modi said. “Local is not only our need, it is also our responsibility. Time has taught us that we must make our life mantra ‘local’.
Nevertheless, India is important for Silicon Valley as it is a one billion plus person market which is still largely untapped. China is dominated by e-commerce players and largely bypasses global tech companies, while established markets in the West offer limited growth opportunities.
Although Amazon is already India’s largest e-commerce player, a sudden change of rules in 2018 reduced its ability to compete with domestic companies, allowing foreign players to market their stock as an e-bay style marketplace Limited to operations rather than selling.
After a long time, Ambani announced that his own giant conglomerate, Reliance Industries, would enter into e-commerce, establishing control over both India’s largest mobile carrier and its largest network of brick-and-mortar stores.
In response, Amazon tried to register its presence on the ground with an investment in India’s second largest physical retailer, the cash-strapped Future Group. But the rules prohibiting foreign ownership in that area meant that its investment was too low for Future Group to fall into financial crisis.
Last month, it was Ambani, halting most of the company’s operations for $ 3.4 billion. Faced with a regulatory disadvantage and a competitor only looking to get stronger, it’s not hard to see why Amazon might be tempted to offer peace now. “Reliance has brick and mortar, logistics, warehousing, and now its online construction in recent times. Deals,” said Chakra Lokpriya, chief investment officer of TCG Asset Management in Mumbai. “Amazon or others to rebuild it It will take years of operational infrastructure for multinationals, and hence Reliance Industries is the preferred partner for their entry into India. “
Facebook may have done a similar calculation. The company plans to convert its increasingly popular WhatsApp messaging platform into a nationwide payment system, which has been stuck in the Indian regulatory body for more than two years.
Meanwhile, Reliance is moving forward with its payment system with its nearly 400 million mobile subscribers as an underlying user base. But since their deal, Facebook and Reliance have announced that WhatsApp will be the main platform, at least for Ambani’s online grocery store, their flagship e-commerce offering, ensuring that the social networking giant’s This is a good opportunity in the e-commerce market.
Meanwhile, Google has announced plans to roll out a low-cost phone with Ambani that will run on its Android operating system. Ambani was earlier selling his low-cost phones, which ran on a different operating system. Google, like Facebook, may have thought it better to work with Ambani. Amazon can do the same.
“Business in India is taking a monopoly approach,” said Matthew Antony, managing partner of Aditya Consulting, a boutique legal advisory company in Mumbai. “It is becoming increasingly clear with Facebook and similar investment deals that large foreign business investment in the country is the first right of refusal at Reliance’s door of default.”
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