Amazon Bailout Plan For Future Retail: As Lucrative As Reliance?

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The Amazon-Future-Retail saga has been unfolding with an interesting turn of tails with each passing week. After crushing hopes for Reliance to acquire Future Retail in the Supreme Court of India, Amazon is now gearing up to bring Future Retail under its umbrella.

Two people familiar with the internal discussions at Amazon stated that Amazon.com Inc. has prepared a bailout plan to cash-strapped Future Retail, reports Mint. The eCommerce behemoth is confident of winning the case in the Singapore International Arbitration Centre (SIAC) opposing the planned takeover of Future Retail by Reliance Industries Ltd. (RIL).

On Tuesday, shares of Future Group companies rallied to 17% on the BSE intraday trades Tuesday due to the report that Amazon has created a plan to bail out cash-strapped Future Retail.

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Amazon Future Retail Bailout Plan: Big Picture

  • Amazon recently won the case against the proposed Reliance-Future deal worth Rs 24,713 crore in the Supreme Court of India.
  • Experts believe that the impact of the verdict will have a direct impact on SIAC decision, which is due by the end of this month.
  • Amazon already has an upper hand against Future Retail in SIAC which gave interim relief to the eCommerce behemoth by putting a hold on the Reliance-Future deal in October last year.
  • After getting relaxation from Delhi High Court early this year Future Retail once again approached SIAC to modify its order.
  • Meanwhile, Amazon approached Supreme Court challenging the order of the Delhi High Court.
  • Future Retail, however, lost the case against Amazon in Supreme Court. And now awaiting the decision of SIAC in the case filed by Future Retail asking for a modification.
  • All Future Group stocks fell between 24% and 26% in the last week after Amazon won the Supreme Court case.
  • The retail market of India has got a significant strategic value for both Amazon and Reliance.
  • The retail sales in India is estimated to touch $1.4 trillion by 2025 and eCommerce would account for a sizeable 10% of that.
  • The reports on Amazon preparing a bailout plan for Future Retail indicate clearly that the eCommerce behemoth was in desperate need to have Future Retail by its side to counter Walmart-owned Flipkart and Reliance Retail.
  • The stock of Future Retail was locked in the 10% upper circuit band at Rs 52 on the BSE. It recovered 21 percent from the intra-day low at Rs 43.05. 

Food For Thought

It would be interesting to see what Amazon has got to offer to lure Kishore Biyani who accused Amazon of wrongdoings multiple times during the nine-month-long court battle. He, however, may not have many choices after the Supreme Court ruling in the favour of Amazon.

Will Amazon make the most of the situation by evaluating the value worth of Future Retail much lesser than Reliance? We believe a lot of actions are yet to happen in the days to come.

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