Friday, Aug 19, 2022
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Why Is Mukesh Ambani Headed To London With Boots And Other Acquisitions?

In the last two years, India’s richest man has acquired or shown interest in a series of companies in the UK, the latest being a bid for pharma chain Boots. Is he imagining a global role for himself in the coming years?

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India’s richest man Mukesh Ambani is relentless in expanding his portfolio across borders, and he is doing it with a sense of purpose. This time, his Reliance Industries Limited is eyeing to acquire the UK’s high-street chain Boots. According to a report in the Financial Times, the retail-to-energy conglomerate is partnering with US buyout firm Apollo Global Management to make a bid to acquire Boots, a popular pharmacy brand in the UK.

The Financial Times reporters believe that if the Reliance and Apollo Global Management bid goes through, it will “see one of Britain’s best-known retailers expand its presence into India, south-east Asia and the Middle East”. While this may be true, there is a strong chance that this deal will do much more than just open the non-UK market to Boots.

This is not the first time Ambani has shown interest in the UK markets. He has a consistent approach to testing the UK markets in the last few years, so much so that when he bought the historic British country club Stoke Park for Rs 592 crores last year, it set rumours about his shifting out of India. Stoke Park, which featured iconic James Bond movies, is touted to be the second home for Ambani and his family now. According to reports, the club consists of 49 bedrooms, a state-of-the-art medical facility and a shrine replicating Ambani’s 27-floored house Antilia in Mumbai.

While Reliance Industries has been one of the biggest industrial houses in India since the time of Mukesh Ambani’s father Dhirubhai Ambani, the gap between it and other industrial houses started increasing ever since Mukesh Ambani became his own man and started stamping his businesse empire in his own image after settling a fratricidal feud with his younger brother Anil. In this period, Mukesh also started building a corporate brand image for himself, his family, especially his wife Nita and his children.

A sagacious businessman in Mukesh Ambani also started investing in sectors which gave his group a brand identity while not necessarily giving it any real profits. His investments into sin sectors, like the Indian Premier League—in which it bought the Mumbai Indians franchise for about $112 million in 2008—started in this period. His last year’s investment in Stoke Park could be bracketed with the Mumbai Indians, albeit with an international flavour.

While corporate branding may not be a profit-making exercise per se, it is often tied to well-planned network of business strategy. Reliance’s interest in Boots via many other acquisitions on the way holds clue for such a strategy. The parent company of Boots, US-based Walgreens Boots Alliance, had put its UK subsidiary for sale in December last year, to focus on domestic business. Boots currently owns over 2,000 stores in the UK and reportedly gets about 45% of its estimated GBP 6 billion in annual revenues from providing services such as prescriptions and vaccinations to the country’s state-run National Health Service. The UK-based firm is valued at $7.5 billion, according to the Financial Times report.

These numbers make Boots a lucrative proposition for Ambani. It brings two immediate advantages to him. First is the business logic both in the UK and India. In the post-Covid-19 world, pharma companies have rediscovered their love for associating with government programmes all over the world. Boots already has a monopolistic alliance with the UK government that can service as a template for Ambani to expand it in other European countries. At the same time, the pharmacy segment is a lacuna in Ambani’s retail business in India, where he has touched upon almost all other retail segments in the organised retail space. With Boots in tow, Ambani can tom-tom his presence in another retail segment. Given that Ambani is known for creating the whole supply-chain linkages from the producer to the consumer via all the intermediaries and the fact India is a pharma hub with its generic push that gives it a global advantage, do not be surprised if tomorrow Ambani ties Indian pharma companies with Boots services and stores for European government programmes, where, unlike India, investments in public health is often an election issue.

The second logic is that Ambani is conscious of building a global corporate image for himself, for which these types of acquisitions come in handy. In contrast to the other rich man of India, Gautam Adani, with him Ambani has been playing cat-and-mouse game to stay at top of the India’s richest list, Ambani look-global approach is rather decisive, while Adani is swiftly consuming all domestic spaces due to his proximity with the ruling elite.

The acquisition like Boots, if it materialises—on top of his acquisition of Hamleys in 2019 and battery technology firm Faradion in 2021—will let Ambani not only find lucrative markets out of India, it will also let him make up for the losses he receives in India at the hand of Adani in the domestic duopoly.

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