InvestorQ : Is the Amazon deal with Reliance Retail actually happening or is it purely speculative?
vaishnavi mhatre made post

Is the Amazon deal with Reliance Retail actually happening or is it purely speculative?

vidhya Laxmi answered.
3 years ago

As of now there is no confirmation from either side but you can be dead sure that there is rarely smoke without fire so there some big deal cooking somewhere and we will get to know sometime in the future. It could be Amazon too.

What we have seen is not Reliance denying the deal. They have only said that they cannot comment on any speculative news on deals, which is the standard manner in which the PR department of any large company responds, so you need not read too much into that.

In fact, Bloomberg had even reported that Reliance Industries had already initiated talks to sell as much as 40% in Reliance Retail Ventures to Amazon for a consideration of $20 billion. That would be more than the stake sold by Reliance in Jio Platforms where 32.98% was sold across 12 investors.

However, it must be said that a deal of that magnitude, if it actually happens, could substantially accelerate consolidation in India’s organized retail market. It could also push millions of small retail units into the organized segment.

Reliance Retail already does Rs.162,000 crore of revenues in a year as of Mar-20 and this makes it nearly 7 times the size of D-Mart. Reliance Retail is also better than D-Mart on parameters like revenue per store and revenue per SFT. That should make it attractive.

A combination of Reliance and Amazon will be the perfect foil to the combination of Wal-Mart and Flipkart. It will summarize the Indian retail industry down to just two players with a substantial customer base and an incredibly fat cheque book.

However, some analysts do remain sceptical. They believe that such a transaction could adversely impact Amazon’s ambitions for India, where it has been extremely bullish. Also, Amazon may not be too comfortable being the junior partner in the deal.

This appears to be a reasonable argument considering that Amazon has invested billions of dollars into growing its India business. Obviously, it may not be too keen to just forfeit all that advantage at a time when it is already at the top. We will really have to wait.