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Amazon unlikely to add Reliance Retail stake to its shopping cart

Amazon has now started exploratory talks with Landmark group’s value fashion retail chain, Max, for acquiring a similar minority stake in it.

, ET Bureau|
Sep 24, 2019, 11.45 PM IST
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KOLKATA: Amazon’s plan to acquire stake in Reliance Retail has likely fallen through due to the high valuation of Mukesh Ambani’s retail business and the American ecommerce giant might have also demurred from such large investment in the Indian market after the government tightened regulations for foreign direct investment (FDI) in ecommerce, two senior industry executives said.

These executives, who have business relationship with Amazon, said Reliance has potentially valued the retail business at about Rs 2.5 lakh crore to Rs 3 lakh crore, and given that, Amazon’s initial plans to acquire a minority stake of 10-25% will mean a huge commitment. Amazon was in exploratory talks with Reliance Retail for last 3-4 months.

Amazon has now started exploratory talks with Landmark group’s value fashion retail chain, Max, for acquiring a similar minority stake in it, the executives said.

Max had generated sales of about Rs 3,500 crore in 2018-19 and value fashion retailers are typically valued at about 1.5 to 2 times of their revenue, though talk with Amazon is in an early stage right now, they said. Amazon and Max have recently entered into trading arrangement where Max exclusively sells its products through the Amazon’s online marketplace in India.

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Reliance’s pureplay retail business comprising consumer electronics, smartphone devices, grocery, and fashion and lifestyle had generated about Rs 73,508 crore sales last fiscal. Amazon was particularly drawn by Reliance’s consumer electronics and grocery retailing business where it is leader by a huge margin.

In response to an email, an Amazon India spokesperson said it has no comment for the story. Emails sent to Reliance Retail and Landmark Group India remained unanswered till Tuesday press time.

Amazon wants to make relatively smaller investment in brick-and-mortar retail chains in India ensuring it has the first right of refusal for future stake sales in such chains, blocking the door for entry of any other investor.

The government earlier this year tightened norms for FDI in e-commerce, much to the dislike of foreign e-commerce firms, by bringing in various clauses such as the one which prohibit marketplace entity to own more than 26% in a seller. Last month, Amazon agreed to acquire 49% in Future Coupons, a promoter group company of Future Retail, which runs over 1,400 Big Bazaar and EasyDay stores.

About a year ago, the ecommerce giant acquired More Retail (earlier called Aditya Birla Retail) along with Samara Capital. More currently runs over 620 stores. In 2017, Amazon acquired 5% stake in Shoppers Stop, which currently has 83 stores.

“Amazon has been exploring options to acquire stake in every leading brick-and-mortar retail chain with a sizeable presence and proper processes in place. It is part of their omni-channel strategy and also making an entry as a strategic investor in case FDI regulations ease in retail,” one of the executives said.

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