Mukesh Ambani owned Reliance Industries is offering to sell 20 billion dollars stake in its retail arm to Amazon in the Reliance-Amazon Deal. The retail group which has already raised 20 billion dollars in this year from investors including Facebook and Google, is willing to sell an up to 40 percent stake in the retail business to Amazon.
The benefits of the Reliance-Amazon Deal
If the deal is finalized, it will turn the two business rivals into strategic partners in one of the world’s largest consumer market. This deal will also start a three-way battle between Reliance-Amazon, Flipkart-Walmart, and other players in India where the coronavirus pandemic has accelerated a shift in consumer behavior to retail e-commerce from brick and mortar.
The deal could entail Amazon investing 20 billion dollars in Reliance Retail Ventures, which is the holding company of RIL’s retail business. If transacted it will be the biggest inbound M&A in India. If the deal finalizes it will bring together the largest online and offline retailers in the country. This will leverage the deep offline entail network of Reliance Retail Industries. It will also establish a logistics network of Amazon to harness cross-selling and omnichannel opportunities. It will lead to faster e-commerce penetration growth in the country. Both the companies at this point have refused to comment on anything on the deal.
Mukesh Ambani’s Plans for Reliance Retail
Mukesh Ambani who is Asia’s richest man is turning his focus toward retail. This is after successfully building India’s top telecom network by customers in less than four years. He is hoping to take a dominant position as the country’s large consumer market comes of age. Jeff Bezos led Amazon has held talks about investing in Reliance Retail. Amazon has expressed interest in negotiating potential deals but has made no decisions yet.
Mukesh Ambani had previously said that he had received strong interest from strategic and financial investors in the retail business. He would be finalizing deals and partnerships in the coming quarters. He further added that Reliance Industries Ltd. in the future will hold an IPO of the consumer business.
RIL, with almost 12,000 stores selling a wide range of products, acquired rival Future Group’s retail arm in August. On 9th September 2020, it announced a 1 billion dollars investment from Silver Lake Partners.
Shares in Reliance Industries were up 6.2 percent in midday trading in Mumbai after hitting a record intraday high. The company earlier on 10th September 2020 became the first listed Indian firm to cross 200 billion dollars in market capitalization.