RIL offers Amazon 40% in retail unit for $20billion?

Daniel Fowler
September 11, 2020

Billionaire Mukesh Ambani-led Reliance Industries on Thursday became the first Indian company to hit a market capitalisation of $200 billion, helped by strong rally in its share price.

Reliance Retail is a subsidiary of the conglomerate Reliance Industries, which has businesses in the energy, petrochemicals, textiles, natural resources, and telecommunications sectors.

Reliance Retail now has around 12,000 stores across the country and sees about 640 million footfalls.

Reliance Industries has offered to sell Amazon a 40% stake in its retail arm in a deal that could be worth $20 billion, a source told Bloomberg News. Reliance did not immediately return an email seeking comment. The report said that any transaction between the two players would also boost their alliance that was indirectly forged last month through an unrelated purchase by RIL when it bought assets of Future Retail. "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.

"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.

At Thursday's closing price, RIL had market cap of Rs 15.3 billion or Dollars 208 billion.

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Amazon has held talks about investing in Reliance Retail and expressed interest in negotiating potential deals, according to the report.

However, with Reliance's acquisition of Future Group's assets, both the companies came to the same table given Amazon's 49% stake buy - for an estimated Rs 1,500-Rs 2,000 crore - in Future Coupons, the promoter entity of Future Retail in August 2019. While Silicon Valley fund Silver Lake was the first to come on board, other USA and Middle Eastern investors, including KKR, L Catterton, Abu Dhabi Investment Authority, Saudi Arabia Public Investment Fund and, Mubadala are in discussions to acquire a piece of RRVL, which is valued at $57 billion.

"It is a strategic relationship that these funds have with Reliance which goes beyond one deal", said this source. "Our company evaluates various opportunities on an ongoing basis", it added. "And Amazon, is the best at it".

None the less, if we take this valuation, then for $20 billion investment, Amazon can get upto 35-40% stake in Reliance Retail.

"Reliance Retail does not need any investor to teach it how to run retail business in India".

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