Reliance Industries is offering to sell a US$20 billion stake in its retail business to Amazon.com Inc., according to a report by Gulfnews. Amazon has held discussions about investing in the conglomerate’s Reliance Retail Ventures Ltd. unit and has expressed interest in negotiating a potential transaction. Mumbai-based Reliance Industries, owned by Indian billionaire Mukesh Ambani is willing to sell as much as a 40% stake in the subsidiary to Amazon. A deal, if successful, would not only create a retail behemoth in India but will also turn Jeff Bezos and Asia’s richest man from rivals into allies in one of the fastest-growing consumer markets in the world. At $20 billion, the deal would be the biggest ever in India as well as for Amazon
In India, where a lot of people still shop in tiny street-corner stores, the deal could be Amazon’s way of acknowledging that it needs a locally-entrenched partner with a strong on-the-ground presence. For Amazon, Reliance would provide a brick-and-mortar component to its ambitions in a country where online purchasing still accounts for a minuscule share of an estimated $1 trillion retail market.
A deal with Amazon would give further credence to Ambani’s ambitions to create an e-commerce giant for India akin to China’s Alibaba Group Holding Ltd. Reliance Retail already lured about $1 billion from Silver Lake Partners, while US private equity firm KKR & Co. is in advanced talks to invest at least $1 billion.
India’s retail sector has become a battleground in recent times, with major investments made by giants Amazon and Reliance Industries, both of whom are seeking to expand their presence on the subcontinent, particularly in Future Retail, a key operator in India’s retail sector. According to Bloomberg reports, Reliance is closing on a deal to acquire a stake in Future Retail, which operates retailers including Big Bazaar. This comes only months after Amazon entered a long-term business agreement that saw Amazon India become the official online retail channel for Future Retail. At the end of 2019, Amazon also acquired a small stake in Future Retail with the purchase of a 49% stake in Future Coupons, the promoter entity of Future Retail.
Satish Meena, senior forecast analyst at Forrester Research, told Bloomberg that this is shaping up to be a fierce battle, particularly in groceries, which accounts for 55% of all Indian retail sales. “Grocery is Reliance’s strength and they will assert their pricing power by combining their offline muscle,” said Meena.
In 2020, Reliance piloted its online retail platform JioMart, which has since been expanded to 200 cities and towns across India. According to a Bloomberg report, Mukesh Ambani, managing director of Reliance Industries, said four-fifths of the fruits and vegetables sold on JioMart or through its retail outlets were sourced directly from farmers. Amazon has also launched its own project aimed at developing a farm-to-fork model.