Mukesh Ambani\'s Reliance Industries to offer Amazon $20 bn stake in retail arm\, claims Bloomberg report

Indian billionaire Mukesh Ambani’s Reliance Industries Ltd. is offering to sell a roughly $20 billion stake in its retail business to Amazon.com Inc., according to a person with knowledge of the matter.

Amazon has held discussions about investing in the conglomerate’s Reliance Retail Ventures Ltd. unit and has expressed interest in negotiating a potential transaction, the person said. Mumbai-based Reliance Industries is willing to sell as much as a 40% stake in the subsidiary to Amazon, the person said, asking not to be identified because the information is private.

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, according to data compiled by Bloomberg.

Shares of Reliance Industries extended gains and touched an all-time high after the Bloomberg News story. The stock surged 4.2% as of 12:08 p.m. in Mumbai. The Indian rupee rose as much as 0.5% to 73.1588 per dollar on expectations of more capital inflows.

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.

Amazon hasn’t made any final decision on the size of its potential investment, and talks could still fall apart, the person said. A representative for Amazon declined to comment.

“As a policy, we do not comment on media speculation and rumors,” a Reliance spokesman said in an emailed response to Bloomberg News. “Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations.”

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 U.S. private equity firm KKR & Co. is in advanced talks to invest at least $1 billion, and L Catterton is also considering investing, Bloomberg News reported Wednesday.

The investment in Ambani’s retail ventures comes after he raised $20 billion selling stakes in his technology venture -- Jio Platforms Ltd. -- to investors including Facebook Inc. and Google. The billionaire appears to be seeking to repeat that fundraising strategy with his retail business.

Mukesh Ambani now wants to do a Jio with Reliance Retail

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The plan

Reportedly, Mukesh Ambani's RIL is planning to sell a 15 per cent stake in Reliance Retail Ventures for Rs 60,000-63,000 cr. As per an ET report, fresh shares will be issued to the investors and the company expects to complete the fundraise by October end.

The first investor

Private equity fund Silver Lake is the first to come on board. Yesterday, it announced to take 1.75 per cent stake in Reliance Retail for Rs 7,500 crore. The PE firm had earlier invested $1.35 billion in Jio Platforms.

More waiting in queue

Other investors in Jio Platforms — Saudi Arabia’s Public Investment Fund (PIF), Abu Dhabi-based Mubadala Investment Company, Abu Dhabi Investment Authority (ADIA), L Catterton and KKR — are likely to pick up stakes in the retail venture as well.

Chip makers won't chip in

RIL has reportedly also approached Intel and Qualcomm with the investment offer. Howevever, both the chipmakers have reportedly declined to acquire any stake in Reliance Retail. Google and Facebook are also in two minds and said they would decide on it soon.

The big strategy

Last month, Reliance acquired the retail business of Future Group, consolidating its leadership position in India’s retail sector. In May, Reliance Retail rolled out its JioMart ecommerce venture selling food and grocery items in 200 cities. JioMart is part of Reliance’s ambitious "new commerce" strategy that not only seeks to marry RIL’s vast network of physical stores with JioMart but also enrol millions of kirana shops as their last-mile delivery partners.