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  • All you need to know about Alibaba-Reliance’s rumored partnership

    Publish date: 24th August, 2018


    The drumbeats are getting louder. Alibaba is planning to expand its footprint in India.

    Not shy of making a grand entry, a livemint.com report suggests that the Chinese retail giant is planning to pool resources with Mukesh Ambani’s Reliance Retail to build a “mega” entity in the country.


    What does the report say

    The China-based multinational retail company is apparently willing to pump in about $5 billion in a joint venture (JV) with Reliance Retail.

    Quoting two unnamed sources, the report further states that Alibaba Group has proposed to acquire a larger stake in Reliance Retail to tap the booming digital and physical retail marketplace in India.

    The two sources said Jack Ma, Alibaba’s executive chairman, met Reliance chief Mukesh Ambani at the end of July in Mumbai to discuss the matter.


    What is the objective

    Part of its global expansion plans, Alibaba has rolled up its sleeves to take on the two current market leaders in India: Flipkart and Amazon.

    If other reports are to be believed, the Chinese conglomerate accelerated its India plans on the back of Walmart’s $16 billion acquisition of Flipkart and Amazon’s fresh injection of about $5 billion.

    The proposed partnership would suit both the parties.

    For Alibaba, it is about gaining traction in an ever-growing Indian market, while for Reliance, this joint venture (JV) may allow it to set up its omni-channel retail entity. Omni-channel retailing allows consumers seamless shopping experience, be it from online platforms or bricks-and-mortars stores.


    Other benefit

    A JV with Reliance could be a boon in the long run.

    At the moment, Alibaba’s partnership with PayTM has hit a roadblock following the Reserve Bank of India’s directive to stop adding new customers. Concerns over sensitive customer data compelled India’s central bank to apply the diktat.

    However, a deal with Reliance would allow Alibaba to double-down its digital wallet business in India. That’s because Reliance Retail is planning to set up their own digital wallet app, according to one of the unnamed sources quoted by livemint.com. Therefore, such a plan would help Alibaba hop, skip and jump the PayTM gridlock.


    Are there other players in the fray?

    An August 20 report published by Times of India demonstrates Alibaba’s urgency to enter the Indian retail business. It stated that the Chinese conglomerate also held talks with Tata Group and Kishore Biyani’s Future Retail in recent months over a similar proposal.

    There have also been reports that Alibaba, backed by Goldman Sachs, are planning to equip Samara Capital in acquiring more supermarkets from the Aditya Birla Group.


    Reaction

    Reliance has pooh-poohed the partnership reports, suggesting there was no such meeting between Jack Ma and Ambani in Mumbai.

    But one must view the development with a dose of caution because it is known that Reliance Retail is looking to build an omni-channel retail space in collaboration with Reliance Jio.

    However, if the report is true, then this would be Alibaba’s “largest investment in India”. The China-based company recently opened up their investment strategy in India, owning stakes in PayTM, Big Basket, Tomato and TicketNew.

    Alibaba is the world’s largest retail marketplace. Its two arms — Taobao and Tmall — had a joint transaction volume of $478.6 billion in the FY2016. Meanwhile, Reliance Retail is India’s largest marketplace in terms of revenue


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