Amazon deal talks speculative, says RIL2 min read . Updated: 11 Sep 2020, 07:45 AM IST
According to a Bloomberg report, RIL is willing to sell as much as 40% in the retail unit to Amazon for $20 billion
Reliance Industries Ltd (RIL) has initiated talks to sell a 40% stake in unit Reliance Retail Ventures Ltd (RRVL) to Amazon, Bloomberg reported on Thursday citing a person aware of the matter. Such a deal could accelerate consolidation in India’s organized retail market, analysts said. According to the Bloomberg report, RIL is willing to sell as much as 40% in the retail unit to Amazon for $20 billion.
Analysts said the deal, if concluded, will bring together the largest offline and online retailers in India and will be positive for both. “Reliance can benefit via an increase in its addressable user base for JioMart via access to existing 140 million active users of Amazon," said Credit Suisse. Amazon can benefit by leveraging Reliance Retail’s established offline network for online orders and strengthening its fashion play through addition of Ajio, Reliance’s fashion portal.
Some analysts are, however, sceptical about the possibility of the deal. “A transaction of such nature will adversely impact Amazon’s ambitions for India, which remains one of its most important markets," said a senior analyst with a leading brokerage. “Given the current regulation around foreign direct investment, Amazon will continue to remain the junior partner in the business, and it will no longer have a free hand in competing with JioMart in the online space," he said. “Amazon has invested heavily in growing its India business, and giving up when it is already on top does not make sense."
In a statement, Reliance Industries, however, cautioned the media against publishing speculative news about potential transactions.
“We appeal to the media to carefully examine any such speculative information and safeguard themselves and their readers, many of whom are individual retail investors, from publishing/recycling unfounded and/or incorrect news," the statement said.
“We would like to reiterate that as a policy, we do not comment on media speculation and rumours and we cannot confirm or deny any transaction which may or may not be in the works. Our company evaluates various opportunities on an ongoing basis," it added.
Reliance Retail has chalked out an aggressive growth strategy. In the next 12-18 months, the company plans to scale up its e-commerce venture JioMart after launching it in 200 cities in May.
The launch came at a time when online grocers witnessed explosive demand amid the nationwide lockdown. JioMart plans to expand into electronics, fashion, healthcare and pharmaceutical products, chairman Mukesh Ambani said at RIL’s annual general meeting on 15 July.
“Reliance Retail has set its eyes on the rapidly growing e-commerce segment," said Jefferies India in a 9 September report, adding that fresh capital may help it take on companies such as Amazon and Walmart-owned Flipkart.