Big Win For Amazon, Future Group-Reliance Deal Put On Hold

In a big win for Amazon, a Singapore-based arbitration panel has put the INR 24,713 Cr deal between Kishore Biyani’s Future Group and Mukesh Ambani’s Reliance Retail Ltd. on hold.  

Reacting to the order, Amazon spokesperson told Bloomberg, “We welcome the award of the emergency arbitrator. We are grateful for the order which grants all the reliefs that were sought. We remain committed to an expeditious conclusion of the arbitration process.”  

However, there is no clarity if the injunction is enforceable in India.

While the Future Group is yet to offer comment, a statement by Reliance Retail said it entered the transaction to acquire assets and business of Future Retail “under proper legal advice and the rights and obligations are fully enforceable under Indian law. RRVL intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay.”

Passing an interim award in favour of Amazon, VK Rajah asked the Future Group to put the deal on hold and said that the deal cannot go through until it finally decides the matter, sources with direct knowledge of the development told Moneycontrol.

In August last year, Amazon acquired a 49% stake in the Kishore Biyani-owned Future Coupons for around INR 1,500 Cr. Future Coupons is the promoter-entity of India’s second-largest retail chain Future Retail and owns a 7.3% stake in the company. Amazon also managed to acquire around a 3.58% stake in Future Group.

According to the contract signed between Amazon and Future, the sale of the business to rivals (Reliance) is barred. Amazon had claimed that Future Group violated the deal between the two companies when it entered into an agreement with Reliance earlier this year. 

On August 30, Reliance Retail had acquired the retail, wholesale, logistics, and warehousing businesses of the Future Group for INR 24K Cr. Biyani’s Future Enterprises Ltd (FEL) retained the manufacturing and distribution of FMCG goods, integrated fashion sourcing and manufacturing businesses, its insurance joint venture with Generali, and a joint venture with NTC Mills.

Reliance Retail had approached antitrust watchdog Competition Commission of India (CCI) to review the deal on September 21.

Future Retail has more than 1500 stores across 437 Indian cities and towns covering an area of 16 Mn square feet and is the parent of brands like Big Bazaar, Fashion Big Bazaar, HomeTown, Food Bazaar, and others. Big Bazaar reportedly contributes about 80% to Future Retail’s revenue. Comparatively, Reliance Retail operates in nearly 12K stores across 6,600 towns and cities, covering an area of 28.7 Mn square feet.

Last month, Inc42 reported that India’s antitrust watchdog, the Competition Commission of India (CCI) will review the offline and online aspects of the deal between Reliance and Future Group and their effect on the competition in the sector. 

In the last couple of months, Reliance Retail has been attracting investments from several companies, some of which have previously invested in Reliance’s digital venture Jio Platforms as well. On October 6, Inc42 reported that the United Arab Emirates (UAE)-based sovereign wealth fund Abu Dhabi Investment Authority (ADIA) has committed to invest INR 5,512.50 Cr in Reliance Industries’ retail unit Reliance Retail in exchange for 1.20% equity stake on a fully diluted basis. 

When the investment comes through, Reliance Retail will have raised INR 37,710 Cr from global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG and ADIA in less than four weeks. 

With the launch of its online store JioMart, Reliance Retail entered into direct competition with Amazon in the ecommerce sector.