Amazon looks to buy 9.9% shares in Reliance Retail Limited

It has reported on Thursday (July 23) that Amazon Inc is negotiating to buy a 9.9 per cent stake in Reliance Retail Limited (RRL), the retail division of Indian conglomerate Reliance Industries Limited (RIL).

The buzz of the market is that if the deal goes smoothly, the enterprise value of Reliance Retails could be reached around Rs 3-4 lakh crore. This news shocked investors in the grey market, which making the company’s value much higher in the present time.

Reliance Retail Limited has always been one of the best performing stocks in the unofficial market for unlisted stock exchanges. In the last few months, it has surged by more than 150 per cent and reached between Rs 1,150 and Rs 1,200. At this value, Reliance Retail has surpassed the listed blue chip stocks such as Hindustan Unilever Limited (HUL) and HDFC Bank in terms of market capitalization.

RIL holds approximately 99.95 per cent of the shares in Reliance Retail and approximately 25 lakh shares are circulated in the unlisted market. Industry observers say that valuation of RRL may reach USD 35-40 billion (Rs 3 lakh crore). In the month of January 2020, RIL proposed a 4:1 swap ratio, which will allow investors to get one RIL share for every four shares in Reliance Retail. The swap ratio brought the value of the retail business to Rs 2.5 lakh crore.

Moreover, Amazon hopes to obtain a strategic priority stake in Reliance Retail for JioMart. The JioMart is an e-commerce company of Reliance’s retail division. It was established in the month of May and posing a huge challenge to Amazon’s local division and Walmart Inc’s Flipkart.

Earlier this year, Amazon India launched a plan to add local small stores on its platform after the government of India imposed lockdown restrictions since March 24 in a bid to limit the risk and spread of the COVID-19 pandemic in the country. An Amazon spokesperson has said through email that the company does not comment on the speculation, while Reliance did not immediately respond to a request for comment.

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Reliance Retail Limited (RRL) is a subsidiary of Reliance Industrial Limited. The company was founded in 2006 and Mr. V. Subramaniam is the CEO of the joint venture. Its retail stores provide clothing and footwear, lifestyle and home decoration products, farm tools and inputs, entertainment and leisure, health and well-being products, electronics, food, groceries. In terms of revenue, the company is India’s largest retailer.

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