After completing an over $20-billion fundraise for Jio Platforms, Reliance Industries Ltd is said to be in talks to raise as much money by off-loading a 40 per cent stake in its arm, Reliance Retail Ventures Ltd, to Amazon Inc, the world’s biggest internet company, Bloomberg News reported Thursday.
This comes less than a month after Reliance Retail — India’s largest retailer — strengthened its position in the sector by acquiring assets from its second-placed rival Future Group.
Amazon has held “discussions” and has “expressed interest in negotiating a potential transaction, a person with knowledge of the matter said,” Bloomberg reported. However, “Amazon hasn’t made any final decision on the size of its potential investment, and talks could still fall apart, the person said.”
Still, the report led to a sharp rally in the Reliance Industries share that shot up by 7.14 per cent to Rs 2,314.65 on the BSE Thursday. Following this rise, the market capitalisation of RIL crossed Rs 15 lakh crore ($200 billion) mark, making it the first Indian firm to enter this bracket. The closest is TCS, with a market capitalisation of Rs 8.74 lakh crore.
The rally in RIL shares led to a 646-point gain in the Sensex at 38,840.32 while Nifty gained 171 points at 11,449.25. Analysts say that almost half of the gain in Nifty Index was contributed by RIL.
According to the Bloomberg report, the 40% stake in Reliance Retail has been offered to Amazon for a $20 billion investment in the company. India’s foreign direct investment rules allow overseas players to own a maximum of 51% in multi-brand retail trading ventures with government approval subject to certain conditions like minimum investment in back-end infrastructure. This includes investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.
Reliance Industries has already raised Rs 7,500 crore by selling 1.75% stake in Reliance Retail to the US-based private equity firm Silver Lake. This deal valued Reliance Retail at Rs 4.21 lakh crore.
In response to a query by The Indian Express, Reliance Industries 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”.
“Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and our agreements with the stock exchanges,” it added.
Responding to an e-mail query, Amazon said: “…we do not comment on speculations of what we may or may not do in the future”.
Amazon and Reliance Industries already have several competing interests in various digital segments including grocery, pharmacies, fashion, electronics, etc.
Further, Amazon has also backed supermarket chain More, which it bought with private equity fund Samara Capital from Aditya Birla Group. More competes with Reliance Retail’s supermarket chain Reliance Fresh.
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.
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