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Alibaba's Jack Ma may buy 50% stake in Mukesh Ambani's Reliance Retail to take on Flipkart, Amazon

BusinessToday.In     August 20, 2018

At Reliance Industries' 41st AGM, Mukesh Ambani said that RIL sees its biggest growth opportunity in creating a hybrid, online-to-offline new commerce platform. More than a month after the annual shareholders' meeting, India's richest man may have finally found a new partner who has tremendous expertise in running an e-commerce business in neighbouring China.

Alibaba co-founder Jack Ma is said to be in talks to acquire a large stake in Ambani-led Reliance Retail with an investment of $5 billion to take on India's largest e-retail giant Flipkart and Jeff Bezos-owned Amazon, Livemint reported.

Alibaba Group has proposed to acquire a large stake in Reliance Retail to create a behemoth in the digital marketplace and also expand Alibaba's physical retail businesses in India, the report said.

The joining together of two big companies is likely to rattle existing e-commerce market leaders in the country. The move could spell a bumpy ride for the likes of Flipkart and Amazon in a market where they have pumped in billions of dollars.

At the shareholders' meeting, Mukesh Ambani gave a peek into his long-term plans to grab a bigger piece of country's fast-growing e-commerce sector which is estimated to grow at a 21 per cent CAGR over the next 10 years to $202 billion. The oil-to-telecom conglomerate wants to synergise the widespread presence of Reliance Retail's physical stores with the strengths of Jio's digital infrastructure.

According to the report, Alibaba Group's executive chairman, Jack Ma, met RIL chairman Mukesh Ambani in July-end in Mumbai to discuss the proposal. The two reportedly discussed a number of issues, including a plan to create a large omnichannel retail entity through the proposed joint venture.

"Alibaba is willing to pick up a significant stake in Reliance Retail, preferably 50 per cent, which will require Alibaba to invest $5-6 billion," the report added.

The joint venture will be the largest investment by Alibaba in an Indian company.

"The deal is crucial for Alibaba, especially after RBI (Reserve Bank of India) directed Paytm (in which Alibaba holds 49%) to stop on-boarding new customers because of the shareholding pattern of Paytm," the report further said.

Reliance Retail, with its 7,500 stores in 4,400 cities attracting more than 350 million footfalls, is among the country's largest and fastest-growing retail companies in the country. Its revenues crossed Rs 69,000 crore in FY18, posting a growth of over 100 per cent year-on-year. Its fashion retail arm Reliance Trends and consumer electronics brand Reliance Digital are the largest in their respective categories.

While the company has separate online websites for every retail vertical, what it currently lacks is a common e-commerce platform. By leveraging the inventory, supply chain, warehouses and nationwide reach of its brick-and-mortar operations, Reliance Retail is likely to have an edge in the e-commerce space.

Ajio, its first pan-Indian e-commerce venture has already undergone a major marketing blitz in recent months. Reliance Retail's other online initiatives like RelianceSMART.in, RelianceDigital.in and RelianceTrends.com are yet to gain customer traction.

Reliance Retail had recently launched its Reconnect brand of consumer appliances and electrical goods. It also operates the largest portfolio of 41 international brands like Gas, Steve Madden, DIESEL, etc.

Reliance clarification: A Reliance spokesperson said on Monday there has been no discussions with Alibaba on stake sale in Reliance Retail Limited. And, there was no meeting between Ambani and Jack Ma in Mumbai in July-end.

Edited By Karan Dhar


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