The mega JV is being planned by Alibaba and Reliance Retail to challenge the likes of Flipkart and Amazon who have been making significant inroads in the Indian e-commerce industry.
Representative image |Photo Credit: BCCL
New Delhi: China-based multinational e-commerce and retail company Alibaba Group Holding Limited is believed to have expressed interest to form a “mega” Indian retail joint venture with Mukesh Ambani’s Reliance Retail, reported livemint.com. The report added that the company has already initiated talks with Reliance Retail and is keen on making an investment of at least $5 billion.
The report, which quoted two people who are aware of the development, suggested that the mega JV is being planned to challenge the likes of Flipkart and Amazon who have been making significant inroads in the Indian e-commerce industry.
It has come to light that Alibaba Group has floated a proposal to acquire a significantly large stake in Reliance Retail to create a market leader in the digital marketplace besides expanding Alibaba’s physical retail business in the country, add the people who refrained from being named.
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The fact that Ambani had earlier announced that the company is planning to take its retail business to new heights, the development seems to be a prelude to a major e-commerce battle in India over the next few years as competition continues to mushroom in the industry.
Worth mentioning that both the entities have already held talks regarding the mega JV. Reliance Industries Chairman and Alibaba’s Executive Chairman Jack Ma had earlier discussed the proposal recently. If the report is to be believed, the two behemoths discussed a plan to create a holistic retail entity as part of a joint venture.
One of the people in the know went on to say that Alibaba has floated an interest to pick up approximately 50 per cent stake in Reliance Retail; it would cost Alibaba a hefty amount of $5-6 billion. However, Alibaba could also end up holding a smaller stake as part of a strategic JV.
In fact, global financial services company Goldman Sachs has also advised the Chinese group on the proposed venture. It may be noted that if Alibaba decides to go ahead with the investment, it would be the largest investment by Alibaba in an Indian entity.
Another person with knowledge on the matter suggested that the deal is “crucial” for Alibaba after the Reserve Bank of India (RBI) asked Paytm – in which Alibaba holds 49 per cent stake – to stop adding new customers due to the shareholding pattern of Paytm.
The person suggested that Reliance Retail is seeking to achieve a platform like Paytm, adding that it would benefit Alibaba the same way as it was during its association with Paytm. Worth mentioning that Reliance Retail, which is a unit of RIL, is the biggest retailer in India in terms of revenue generated and offers a wide diversity of products.
While the retail business of Reliance has been performing impressively over the last few quarters, Ambani now plans to use technology like augmented reality and virtual reality to enhance the shopping experience for customers.