Alibaba in talks with Reliance Retail for e-commerce JV: report

The Jack Ma-led Chinese group proposes to invest $5 billion to acquire a 50-per cent stake in the proposed mega Indian retail joint venture as it looks to enter the world’s fastest-growing economy, reports quoting sources with direct knowledge of the matter said.

Alibaba’s executive chairman Jack Ma had met Reliance Industries chairman Mukesh Ambani last month in Mumbai to discuss investing in Reliance Retail to create a, digital marketplace and expand Alibaba’s physical retail businesses in India, the report said.

The two are reported to have looked at options, including the creation of 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 quoted one source as saying. “It could also result in a strategic JV between Alibaba and Reliance Retail, with a smaller stake held by Alibaba.”

A combination of cash-rich Alibaba and Reliance Industries could pose a major challenge to Walmart in India, indicating that the battle for India’s booming e-commerce market could intensify further.

A stake in Reliance Retail will give Alibaba an edge over Walmart and Amazon as foreign entities are not allowed to hold inventory in India and can only operate as marketplaces.

Amazon is taking an indirect route — operating through local vendors — to avoid any complications and comply with the numerous conditions that it might have to follow under the multi-brand FDI norms.

Alibaba’s talks with Reliance Retail and other potential retail partners in India assume significance after RBI’s directive to payment firms such as Visa, Mastercard and PayPal Holdings to ensure before October that the data of Indian customers stay in the country.

“The deal is crucial for Alibaba, especially after RBI (Reserve Bank of India) directed Paytm (in which Alibaba holds 49 per cent) to stop on-boarding new customers because of the shareholding pattern of Paytm,” the report quoted another source as saying.

RBI was concerned of the Chinese company accessing Paytm’s customer data and has asked Paytm to improve security mechanisms to store customer data, the Mint reported early this month.

Reliance is looking at a similar model like Paytm — an e-commerce and digital wallet business — and such a model would benefit Alibaba.

Alibaba operates two successful online retail marketplaces, Taobao and Tmall – with combined transaction volume of $478.6 billion in fiscal 2016, and expected turnover of over $900 billion by 2020. As of February 2018, Taobao had at least 580 million monthly active users, while Tmall had 500 million.

The joint venture, if it goes through, will be the largest investment by Alibaba in an Indian company.

Goldman Sachs is advising Alibaba on the proposed venture, the person said. A Goldman Sachs spokesperson declined to comment. Emails sent to Reliance and Alibaba remained unanswered.