Amazon, which was in talks with Reliance Retail to acquire stake in the Mukesh Ambani-led retailer, may not go through with the deal.
The high valuation of the business along with the tightening of regulations on FDI policy by the Government may prove to be deterrents as the e-commerce giant may not want to infuse such large capital in the Indian market.
The exploratory talks between the two companies have been going on for the past 3 to 4 months, but the high valuation of 2.5-3 lakh crore of Reliance Retail means that even a minority stake of 10 to 25 per cent in the company will be a huge investment for Amazon.
So what it has done is that Amazon has now turned to Landmark group’s Max to explore the option of acquiring a minority stake.
Amazon and Max had recently entered an agreement to sell the latter’s merchandise exclusively on Amazon. The retailer’s sales amounted to Rs. 3,500 crore in the last fiscal and its valuation will be set at around 1.5-2 times the revenue garnered.
Earlier this year, the Government 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 prohibits marketplace entity to own more than 26 per cent in a seller.
But Amazon has been increasing its investment across retail chains by acquiring More Retail (operating more than 620 stores) and Samara Capital, a 49 per cent stake in Future Coupons (promoter group company of Future Retail) and a 5 per cent stake in Shoppers Stop.
Amazon wants to make relatively smaller investment in bricks-and-mortar retail chains in India ensuring it has the first right of refusal for future stake sales in such chains, preventing any other investor from making an entry.
Source: https://in.apparelresources.com