Tiny deals behind Mukesh Ambani’s bid to take on Amazon

Bloomberg

A $2.5 billion spending spree involving more than two dozen deals provides some insight into how Mukesh Ambani is piecing together a strategy to take on Amazon.com in India.
Asia’s richest man is sharpening his focus on e-commerce with a string of tiny acquisitions and stake purchases to face
the world’s largest online retailer, after shaking up India’s telecommunications industry with cheap data and free calls.
The acquisitions represent a new strategy for Ambani’s Reliance Group, whose founder — his father Dhirubhai Ambani — built a petrochemicals business and the world’s largest oil-refining complex from scratch. It’s a clear pivot towards consumer offerings in a country that’s becoming a battleground for giants such as Amazon.com and Walmart Inc’s Flipkart Online Services Pvt.
“The deals may be tiny, but it’s more likely that they are putting together a team of talented people by acquisitions, who can then be invested in
to build out larger platform products,” said Kunal Agrawal, an analyst with Bloomberg Intelligence.
Ambani is racing to grab a share of an online shopping market that Morgan Stanley estimates will grow to be valued at $200 billion by 2028 from about $30 billion last year. India will have 829 million smartphone users by 2022, according to Cisco Systems Inc, from a projected half a billion this year. That means a potential surge in demand for online services and products from music to food delivery, electronic gadgets and clothes.

‘Shopping Experience’
Ambani outlined his plan to shareholders in July, saying the effort will involve the group’s unlisted businesses Reliance Retail Ltd and Reliance Jio Infocomm Ltd. He has already spent about $36 billion on Jio, which has rolled out a nationwide 4G network and fiber broadband infrastructure, causing some established rivals to pull back.
The service will seek to get on board the millions of mom-and-pop stores that dominate the Indian retail market, providing heft to its operations. Chains and large department stores account for only 10 percent of the market.
The Reliance e-commerce platform would enable small merchants to “do everything that large enterprises and large e-commerce players are able to do,” Ambani said.
The “acquisitions will help Reliance create a unique and a very powerful digital economy ecosystem for Reliance, which is way beyond simple merchandise e-commerce,” says Arvind K. Singhal, chairman and managing director of Technopak
Advisors, a management consulting firm.
The combined value of the acquisitions doesn’t include a recently terminated 2017 deal by Jio to buy airwaves, towers and fiber assets for $2.5 billion from younger brother Anil Ambani’s Reliance Communications Ltd.
Ambani’s e-commerce plans have already won the support of investors.
While Ambani puts together the building blocks to take on Amazon and Walmart, the broader fight is already taking shape in India. In a move widely interpreted as extending a helping hand to home-grown business, the government imposed late last year restrictions on the global giants, requiring them to cut cash-back payments and discounts.