SUMMARY
Softbank Vision reportedly undertaking due diligence for Reliance Industries investment
The fund has so far invested almost $10 Bn in India, but its ecommerce portfolio has grown thin
Reliance is set to begin ecommerce operations later this year
Japanese conglomerate SoftBank is reportedly looking to invest around $2 Bn to $3 Bn in Mukesh Ambani led Reliance Jio through the $100 Bn Vision Fund. According to a report in ET, SoftBank is currently undertaking due diligence for the investment.
As of September 2018, SoftBank Vision fund has committed $65 Bn in big tech companies around the globe including Uber, WeWork, Slack, and GM Cruise. In India, it has so far invested around $10 Bn in eight companies namely, Ola, OYO, Grofers, Housing.com, Hike, PropTiger, Paytm and Paytm Mall.
The news about the investment comes at a interesting time for Reliance Industries which will enter the Indian ecommerce market leveraging its vast Jio network in the country. Chairman Mukesh Ambani announced that the ecommerce play would be launched later this year. And Reliance is making big changes in its retail supply chain to prepare for the launch.
Further, Reliance Jio is ready to roll out GigaFiber nationwide this year, and Jio’s GigaTV service is also launching in the next couple of years. With capital-intensive new businesses, Reliance could use a capital infusion. That’s especially true when Reliance’s core petrochemical business is debt-laden and Reliance is in talks for investment to free up some of that debt for the new businesses this year.
According to reports, Saudi Arabia’s state-owned Aramco is in talks to buy as much as a 25% stake in Reliance’s petrochemical business. Interestingly, a large portion of SoftBank Vision Fund comes from $45 Bn committed by Saudi Arabia’s Public Investment Fund. Of course, there’s no confirmation yet on which route Reliance Industries will go to free up or restructure this debt, but SoftBank has a slight gap in its ecommerce portfolio in India, which it could be looking to fil.
SoftBank’s interest in Reliance Industries is in line with its investments in telecom, ecommerce and technology platforms in India. SoftBank sold its Flipkart stake last year; as Walmart acquired Flipkart for $16 Bn, SoftBank exited with a 60% return on investment. Its other ecommerce investment in Paytm Mall has not exactly been a success.
Considering that its ecommerce portfolio in India is starting to looking thin, it makes sense for SoftBank to look at other ecommerce plays, given the growth potential, especially as the ecommerce market is expected to grow to $200 Bn by 2026.
