Reliance Industries Ltd. reportedly has offered a 40% stake in its retail arm worth about $20 billion to Amazon.com, Inc., a report the company said was speculative.
Bloomberg News , citing a source, reported “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 report went on to say that Reliance was “willing to sell as much as a 40% stake in the subsidiary to Amazon” and the deal size at $20 billion would be the biggest ever in India.
While Amazon refused to comment, Reliance said, “In light of a high incidence of speculative media queries and incorrect and ex parte media articles relating to purported capital transactions into Reliance Industries or our group companies, 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.”
The company evaluates various opportunities on an ongoing basis, it said, adding that the company has “made and will continue to make necessary disclosures in compliance” with listing obligations and disclosure requirements.
“Vide this communication, 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,” Reliance said.
Amazon was an investor in Future Group, whose retail business was acquired by Reliance late last month for ₹24,713 crore. On September 9, RIL announced the divestment of 1.75% stake in the retail arm to private equity firm Silver Lake Partners for ₹7,500 crore.
Bloomberg in the report further stated that Amazon hasn’t made any final decision on the size of its potential investment and that talks could still fall apart.
Commenting on the issue, Credit Suisse said if the deal fructifies, then this will bring together the largest offline and online retailers in India.
“The combined entity can leverage the deep offline retail network of Reliance Retail and established logistics network of Amazon to harness cross-selling and omni-channel opportunities, leading to faster growth in e-commerce penetration in India,” it said.
JP Morgan said, “if any such transaction were to happen, it would be positive as Reliance Retail would effectively co-opt its largest online competitor.” It, however, raised question over 40% stake offer, wondering what the implications for futire IPO plans would be, assuming RIL would like to retain a similar or higher stake.
“It is also not clear if any such large-stake sale cash would stay with the parent or be used to grow retail further,” it added.
According to Credit Suisse, Reliance can benefit via increase in addressable user base for its online grocery delivery service JioMart, by getting access to Amazon’s 140 million monthly active users.
Also, it could push higher B2B sales for Reliance Market (cash-and-carry arm) through sellers on Amazon (Cloudtail, Appario Retail).
Amazon can benefit by leveraging the established offline network of Reliance Retail for pick-up of online orders. It could expand user base by tapping footfalls in Reliance Retail stores to drive online cross-purchases, and gain access to a large logistics network, which has further strengthened post Reliance Retail’s acquisition of Future Group’s logistics and warehousing business, it said.
Reliance has already announced the expansion of JioMart to electronics and fashion by end of this month.
“Balance sheet will be significantly strengthened post the deal,” it said, adding, the series of stake sales in Reliance Retail to Amazon and private equity investors can bring in $21-29 billion cash.
