Amazon’s Latest Move Could Put Reliance-Future Group Deal In Jeopardy

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It seems like Amazon is not at all happy with the Reliance-Future Group deal!

The e-commerce giant recently sent a legal notice to the promoters of its Indian retail partner Future Group for entering into the $3.4 billion sale agreement with Reliance Industries Ltd which violates the terms of their non-compete contract.

In August 2019, Amazon agreed to purchase a whopping 49% of Future Group’s unlisted firms provided they would also have the right to buy into Future Retail Ltd. within the period of 3-10 years. 

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However, two months ago, Reliance announced that they struck a deal with Kishore Biyani to buy the retail, wholesale, logistics and warehousing units of the indebted Future Group.

Now, seeing how this Reliance-Future Group deal acts as a breach of the contract, according to a spokesperson from Amazon, the company felt its time they ”initiated steps to enforce their contractual rights”.

Both Future Group and Reliance Industries were reached out for a comment regarding the same, but they are yet to respond to it.

Arvind Singhal, Chairman of Retail Consultancy Technopak Advisors, believes that there certainly has been a breach because there’s no doubt Amazon wouldn’t have incorporated an airtight non-compete and first right of refusal.

Battle For India’s $1 Trillion Retail Space

The Indian retail market is expected to reach $1 trillion by the end of 2025, and thus with this dispute, Bezos seems to be wanting to guarantee Amazon’s spot in the war!

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Amazon was well aware that they needed an Indian partner to have any chances of strengthening their foothold in India. Thus, they set their eyes on Future Retail which sells anything and everything, from groceries to apparel to cosmetics.

The battle, however, is heating up now as India’s retail landscape has also got Reliance, Walmart and Tata Group which are gunning up to claim the largest share of the pie.

Mukesh Ambani, the richest person in Asia, has so far raised more than $5 billion by selling stakes in Reliance Retail Ventures Ltd. to various private equity firms. According to sources in the know, even Amazon is offered a 40% stakes in Reliance Retailfor $20 billion investment.

On the other hand, Walmart is gaining ground as well with Flipkart’s aggressive approach to the market and opening up fulfilment centres in multiple cities.

Tata Group is also preparing to ramp up their speed and enter into the fray with their very own super-app. If rumours have got anything credibility, Walmart is all set to back TATA Group and infuse whopping $20 billion to make the super app a grand success.

Under such circumstances, wherein only one giant can claim the numero uno position, it makes sense for Amazon to tighten its noose on the contract they signed with its Indian partner Future Group.

The only unanswered questions that remain here is:

  • Why did Future Group knowingly strike a deal with Ambani’s RIL when they were well-aware of the pact they made with the global e-commerce giant Amazon?
  • Who would actually be benefited from the latest move made by Amazon against Future Group, considering Amazon is reportedly in talks with Reliance to be a part of it Retail business?
  • Is the notice a result of failed talk between Reliance and Amazon?
  • Will Amazon’s move bring Reliance and Future Group back to the negotiation table?

The answer to the above questions is anybody’s guess right now, and only future developments would be able to reveal the reason. 

But if there’s one thing that is set in stone, its the fact that this early sign of trouble brewing for Future Group can very well turn ugly soon. And if that happens it would either jeopardise the country’s biggest retail deal or end up giving Reliance the upper hand during renegotiation!

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