Reliance Retail Board Headed By Mukesh Ambani Clears $20 Billion Offer To Amazon, Is This The Birth of India’s e-Commerce Monopoly?

Reliance Retail has offered Amazon Inc. stake in the company worth $ 20 billion. || Source:Bloomberg
Reliance Retail has offered Amazon Inc. stake in the company worth $ 20 billion. || Source:Bloomberg

Reliance Retail, the arm of Reliance Industries, headed by Mukesh Ambani, has been reported to have offered Amazon Inc. stake in the company worth $ 20 billion. The news has been reported by media house Bloomberg on Thursday, citing an anonymous spokesperson who conveyed them the news.

This deal might see the two heavyweight competitors of the Retail industry join hands with each other. The oil-to-technology conglomerate Reliance, via several investments, have already brought in $ 20 billion this year. Companies like Facebook and Google have been linked to the have bought stakes in the Reliance Industry’s technological platform, Jio. Now, the retain arm of the conglomerate has offered a 40 percent stake to the American company Amazon inc.

Recently Silverlake Partners, the American private equity firm, who had previously invested $ 1.35 billion or ₹ 10,200 crores in Jio for a 2.08 percent stake of the company in two tranches earlier this year, had again invested ₹ 7,500 crores for a 1.75 equity stake in Reliance Retail.

Amazon, the American conglomerate owned by Jeff Bezos, the richest man in the world, had made comments where he expressed interest in negotiating potential deals with Reliance’s Retail arm according to a report by Bloomberg.

However, when Reuters asked for comments on the new update, neither Reliance nor Amazon replied to the query.

The richest man of India and Asia has successfully built the country’s numéro uno telecom company in the sector by a number of customers in just four years. The company realizing the huge potential in the market targets the huge customer base of the country to make itself the dominant force in the industry.

Reliance Retail has over 12,000 stores spread all over the country and conducts business in a vast range of products. They also acquired the Future group’s retail arm a few weeks back.

Previously Reliance has also entered the pharmaceutical industry by opening another subsidiary where they will also compete against newly inaugurated Amazon Pharma.

Therefore, the two billionaires, the richest man of Asia and the richest man of the world turn into allies from enemies in one of the fastest-growing consumer markets in the world. Also, according to the report of Bloomberg, this deal would not only be the largest deal by any Indian company but also be the biggest ever deal of the American behemoth Amazon Inc.

As the news came out, the stocks of Reliance Industries surged to an all-time high as it touched 8.5% during trading in Mumbai. Reliance’s stock also became the top gainer on the benchmark S&P BSE Sensex. Previously, Reliance Industries on Thursday became the first listed Indian firm to cross $200 billion in market capitalization.

A Reliance spokesman’s email response to Bloomberg News was reported by the media house, ” As a policy, we do not comment on media speculation and rumors. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make the necessary disclosures in compliance with our obligations.”

Through this deal, the American titan Amazon can make its way into India’s offline retail industry. Amazon has always acknowledged that it is required by them to enter the offline market in the country which would add a strong on-the-ground presence which is necessary for a country like India. In the country, online purchasing still accounts for a minuscule share of an estimated $1 trillion retail market, therefore, Reliance’s already laid out network in the segment would help them and provide a base to enter the segment.

Earlier, Amazon in China had gone in alone in the Retail segment where it met with harsh competition from domestic companies like Alibaba Group Holding Ltd and JD.com Inc. With the newly reported plan of the company to join hands Reliance, an already present domestic chain shows that the company has learned from its previous mistake.

Several other companies are also reported to be in line and follow Amazon to invest in Reliance. Mukesh Ambani is eyeing to build an Indian replacement of China’s Alibaba group.

Another US private equity firm, KKR & Co. is in advanced talks to invest at least $1 billion in the company. Bloomberg News also reported that L Catterton is also interested to invest in the company.

 

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