Indian billionaire Mukesh Ambani’s Reliance Industries is offering to sell a roughly $20 billion (Dh73.4bn) stake in its retail business to Amazon.com, according to a person with knowledge of the matter.
Amazon has held discussions about investing in the conglomerate’s Reliance Retail Ventures 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 per cent 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 $20bn, the deal would be the biggest ever in India as well as for Amazon, according to data compiled by Bloomberg.
Shares of Reliance Industries touched an all-time high after the Bloomberg News story. The stock surged as much as 8.5 per cent during trading in Mumbai. It was the day’s top gainer on the benchmark S&P BSE Sensex, which advanced 1.8 per cent intra-day on Wednesday.
The deal would be a highly complementary one that builds on the strengths of either side
The Indian rupee rose as much as 0.5 per cent 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.
“The deal would be a highly complementary one that builds on the strengths of either side,” said Utkarsh Sinha, managing director at Bexley Advisors in Mumbai. “Amazon comes with the might of its warehousing capabilities and the ability to streamline supply chains and sweat assets for maximum returns.”
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.”
Any deal between the two would also bolster the partnership that was indirectly forged last month through an unrelated purchase by Mr Ambani’s group when it bought assets of indebted rival Future Group. Amazon had invested in one of Future’s unlisted firms last year and later expanded the alliance.
Such an investment by Amazon also means the titan is altering its playbook after learning from past failures in the region. Earlier, the online juggernaut’s strategy of going it alone in China flopped in the face of competition from domestic giants including Alibaba Group and JD.com.
For Reliance, the deal will give further credence to Mr Ambani’s ambitions to create an e-commerce giant for India akin to Alibaba Group. Reliance Retail already lured about $1bn from Silver Lake Partners, in a deal that valued the firm at about $57bn.
The US private equity firm KKR & Co. is in advanced talks to invest at least $1bn and L Catterton is also considering investing, Bloomberg News reported on Wednesday.
The investment in Mr Ambani’s retail ventures comes after he raised $20bn selling stakes in his technology venture – Jio Platforms – to investors including Facebook and Google.
The 63-year-old-tycoon, who’s added $24bn to his personal wealth this year, told shareholders in July that the retail unit would be next in line for investors to come on board.
Reliance Retail – a unit of the energy-to-telecommunications conglomerate Reliance Industries – runs supermarkets, India’s largest consumer electronics chain store, a cash and carry wholesaler, fast-fashion outlets and an online grocery store called JioMart. It reported 1.63 trillion rupees ($22bn/Dh81.5bn) in revenue in the year through March 2020. The unit operates almost 12,000 stores in nearly 7,000 towns.
For the Indian business mogul – who has identified technology and retail as future growth areas – the investments would further help to pivot the group away from the energy business he inherited from his father, who died in 2002.
While Mr Ambani is keen to sell stakes to marquee foreign investors, he’s actively acquiring local retail assets to bolster his leadership position.
Besides the Future Group purchase, Reliance is in negotiations to acquire smaller firms such as Urban Ladder, an online furniture seller and Zivame, a lingerie maker, people familiar with the matter said last month.
A stake stale to Amazon, however, may need to clear antitrust hurdles. A collaboration between the world’s largest online retailer with a strong presence in India and the country’s top offline retailer could lead to market concentration risks that may invite regulatory scrutiny.
Bexley’s Mr Sinha also warned of “potential unintended consequences” if the transaction succeeds. “It is not inconceivable that this stifles any other entity from gaining scale in Indian retail space,” he said.
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- Choose your nursery carefully in the first place
- Relax – and hopefully your child will follow suit
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- If you need some extra time to talk to the teachers, make an appointment a few days in advance, rather than attempting to chat on your child’s first day
- The longer you stay, the more upset your child will become. As difficult as it is, walk away. Say a proper goodbye and reassure your child that you will be back
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The biog
Name: Sari Al Zubaidi
Occupation: co-founder of Cafe di Rosati
Age: 42
Marital status: single
Favourite drink: drip coffee V60
Favourite destination: Bali, Indonesia
Favourite book: 100 Years of Solitude
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Overview
What: The Arab Women’s Sports Tournament is a biennial multisport event exclusively for Arab women athletes.
When: From Sunday, February 2, to Wednesday, February 12.
Where: At 13 different centres across Sharjah.
Disciplines: Athletics, archery, basketball, fencing, Karate, table tennis, shooting (rifle and pistol), show jumping and volleyball.
Participating countries: Algeria, Bahrain, Comoros, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Saudi Arabia, Sudan, Syria, Tunisia, Qatar and UAE.
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
UAE currency: the story behind the money in your pockets
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
