Ecommerce giant Amazon is spreading its wings in India and recently started preliminary talks with Reliance Industries to buy a quarter of their total stake.
Reliance Retail could be bought by Amazon
According to Economic Times, the eCommerce company wants to buy a 26% stake in the largest brick-and-mortar retailer in the country. The chain is owned by Mukesh Ambani, the richest man in India. Interestingly, Reliance was previously in talks with Alibaba, a Chinese giant looking for an entry in the Indian market. However, the deal fell through because of differences in valuation.
A person close to the matter, on the condition of secrecy, noted that the retail company could be seeking a strong online partner. However, it is unclear if Amazon and Reliance will seal a deal after initial talks. Reliance said that it would make disclosures to stock exchanges whenever necessary. The company said in a statement,
“As a policy, we do not comment on media speculation and rumors. Our company evaluates various opportunities on an ongoing basis.”
Amazon declined to comment.
Why could this deal be a good choice?
A partnership between Reliance and Amazon could bring two of the biggest forces in retail, both offline and online, together. The global experience of Amazon and its excellent supply chain coupled with logistics expertise could help Reliance connect grocery stores all across the country. They could use their own telecom service Jio, which is the biggest in India by the number of subscribers, to connect all the stores in their chain more conveniently.
Amazon also has a massive online retail presence in India, which could be beneficial for the consumer and private labels business of Reliance Retail, which posted a revenue of $5.53 billion for the latest quarter.
For the eCommerce heavyweight, the Mukesh Ambani led company offers a varied mix of benefits. First, they could make use of Jio’s extensive platform, which is available in over 10,600 Reliance Retail stores across the country. It could also be useful for Amazon to side with Ambani and get some political and lobbying power, given the Indian entrepreneur’s influence and connections.
Technopak Advisors’ chairman Arvind Singhal noted, “There could be synergies which are beyond retail. Whenever there is any kind of policy intervention needed, to be a partner with Reliance certainly will be a big asset.”
It is important to highlight that Amazon’s battle with Walmart has a significant stake in India as well since Walmart now owns Flipkart, one of India’s biggest eCommerce companies.