Amazon Inc has alleged that the deal between Future and Reliance violated a previous agreement that the Future Group had with Amazon. The Seattle-based e-commerce giant has also issued a legal notice against the Indian retailer Future Group for selling its assets to Reliance Industries.
A spokesperson for Amazon said to PTI, “We have initiated steps to enforce our contractual rights. As the matter is sub-judice, we can’t provide details.”
Amazon, the popular e-commerce company, last year had bought a 49 percent stake in one of Future Group’s unlisted companies named, Future Coupons which provided them with the right to buy into flagship Future Retail after a period between 3 and 10 years. Future Coupons hold a 7.3 percent stake in the company Future Group.
Back in August of this year, Future Group sold off its retail and wholesale business to Reliance Industries Ltd’s retail arm called Reliance Retail Ventures Limited which is also the largest retail business in India. Reliance during that same deal also acquired the logistics and warehousing units of the Future Group. The deal between the two Indian firms which amounted to ₹ 24,713 crores is awaiting regulatory approvals.
PTI also reported that they received information from a source who claimed that the Kishore Biyani-led group intends to settle this matter amicably, either through mediation or arbitration. However, neither Reliance nor Future Group made any response when asked about the matter.
Reliance Industries, led by Mukesh Ambani is eyeing to conquer the Indian retail market as they are focusing to grow their retail arm RRVL. They had acquired Future’s assets to magnify their reach across India. The retail arm was started back in 2006 and now has more than 12,000 physical stores across India in more than 6,500 cities and towns. They claim to serve 3.5 million customers each week as of earlier this year which makes them the largest retail brand in the country. The company has been on a fundraising spree as they attract investments from firms all around the globe. They have successfully brought in over ₹ 37,700 crores in less than four weeks from global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG, and ADIA.
Reliance is looking to grow its online market along with its already existing offline market. The investments in Reliance Retail before the festive season might also mean that they are planning to launch well equipped in both online and offline formats before the festive season hits. This would make them a mainstream rival to Amazon who already has an online presence in the Indian market. Amazon through its e-commerce website does about 3-7 percent of all retail business in India. The American retail company had been a presence in the Indian market since it’s launch in 2013 and also has invested more than $6.5 billion in its local business in the country.
PTI also reports that a source with information said that Future Group had made offers to all potential buyers including Amazon while they sold off its assets. They went on to deal with the Reliance Industries only after Amazon had declined it. Also, the contract between Future Coupons and Amazon says that the latter has the first right to invest in Future Retail after three years and before ten years.
Future Group statement had said, “Future Enterprises will subsequently sell by way of a slump sale the retail and wholesale business that includes key formats such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL,” on August 29. They also said that they would sale logistics and warehouse business to RRVL by way of a slump sale
A source said to PTI that the deal between Future and Amazon was conditional. It was based on the government’s FDI policy permitting foreign multi-brand retailing firms. As there is no policy, they can’t invest. Amazon is now raising the issue of the sale after a month since when the deal was announced.